The recent webinar by SteelMint, included a diverse panel comprising of Mr Fahad Javaid from Mughal Steel, Pakistan, Mr Aameir Alihussein from BSRM Bangladesh and Mr Bhartendu Gupta from JSL India among the 3 steelmakers from South Asia, as well as global scrap suppliers Indicaa and Vital Solutions, represented by Mr Vaidhyanathan R.S. and Mr Arshdeep Singh respectively, and discussion ranged from the impact of the lockdown and pandemic on the steel demand, production levels, consequent scrap demand, scrap availability, logistics issues, as well as the forecasts for the year ahead
Capacity utilization – Bangladesh’s major steelmakers including BSRM, are currently running at around 35-40% of steel melting capacity, while some relatively smaller mills have now achieved more than 50% production. In Pakistan too, top steelmaker Mughal Steel is operating at around 30-40% capacity, while India’s JSL has now achieved more than 60-70% production level.
Issues faced by steel mills – Some of the common issues being faced by the steelmaker included high unsold inventories with plants, transportation bottlenecks, as well as managing deliveries of previous consignments which were put on hold during lock down. One of the positives is that by now, the majority of the cargoes piled up at ports (from previous bookings) has now been cleared up and transported back to the mills.
The panelists confided that steel demand in market and production levels will be seeing consistent improvement every month, however the estimates for complete return to normalcy ranged from September-October to a full year, as per different panelists.
Scrap trades recovery in May – Global scrap traders Indicaa Group Ltd and Vital Solutions Pte Ltd discussed how the global scrap demand, particularly to South Asia was impacted during the lockdown period, falling completely in April, while witnessing incremental recovery in May. At the same time, the disruption in scrap collection, leading to slow inflow and consequently low scrap availability in major export markets like North America and Europe, kept the prices supported.
Scrap tightness is likely to continue in near term – In detailed discussion regarding the supply tightness issue in the global scrap market, it was agreed upon that scrap collection rates, although gradually improving in these export countries, is not expected to revive significantly before Sept-Oct’20. During the peak of the pandemic, peddler traffic, demolition projects, car scrapping etc had fallen significantly in these regions, which are now recovering steadily.
Mr Fahad put light on the 3-4 bulk scrap bookings that have been reported since Feb this year, after a couple of years’ gap, and agreed that these bulk bookings were majorly due to the shipment issues and container shortage and freight hikes. Although Mughal Steel has booked another 32k MT bulk cargo with Shredded scrap earlier last week, it was mainly to secure material at prevailing favorable prices before the market shoots up in the coming months, and after normalcy in situation, bulk bookings to Pakistan may not sustain.
Mr Aamier Alihussein too spoke about the record high bulk scrap bookings to Bangladesh in March’20, and attributed it to planning by major steelmakers to stock at a time when price range was suitable, and with significant inventory now, for the rest of the year the buying will be on an as per need basis only.
How will scrap export suspension from UAE impact Indian markets ? Mr Gupta from JSL deliberated on the expected timeline of pick up in scrap demand by Indian mills, and forecasted that by later half of June, many buyers will be in the market for July shipment bookings, albiet cautiously, as per requirement. Also commenting on the impact of UAE’s 4 month suspension on scrap exports, on Indian buyers, stated that as Indian demand will take at least till September to revive completely, the impact will not be significant. While Mr Vaidyanathan estimated that UAE being the largest source for imported scrap to India, along with its very short transit time, will have Indian buyers planning in advance now, for alternative origins.
Price forecast – On the price front, the overall perspective of the panel was that, although the rising demand, and the gradual improvement in supply will balance each other, however demand may pick up sooner than significant improvement in scrap availability, indicating an uptrend in the coming months. For the coming month, the prices to South Asia were forecasted at USD 290-300/MT for Shredded 211 CFR Mumbai and Karachi and USD 300-310/MT CFR Chittagong.
Regarding the active scrap bookings by Turkey in May, it was discussed that although Turkish industry is coming back to normal but margins and price spreads between raw material to semi-finished steel are trending very low currently, at around USD 50/MT against USD 150/MT earlier.
Mr Aameir Alihussein admitted that more than the availability of scrap by Bangladeshi mills (which is stocked in good quantities) the issue was availability of other materials such as refractories, ferro Alloys etc, which are mainly procured from India, and the sudden lockdown in India, left Bangladeshi mills in shortage of these commodities, ultimately having to close down sometime in April, in spite of an absence of an official lockdown in the country. For the coming months, he shared that the strategy will be to gradually increase production, keeping it in line with the demand, and slowly move ahead.
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