The gap between the landed cost of imported scrap and domestic prices is driving Indian mills away from overseas buying of the material for the past 2-3 months. SteelMint’s data reveals that although the gap has narrowed slightly, it is still high at around INR 2,500/t in Mumbai and over INR 3,000/t in Chennai.
Consequently, buyers are not actively booking imported scrap. Chennai mills are silent on inquiries and have almost exited the imported market. Only a few sporadic deals for Dubai- or Brazil-origin scrap were concluded of late with a few Gujarat-based buyers, with the rest of the markets strongly favouring domestic scrap.
“Because of the still high price spread between the landed cost of imports and domestic prices, mills are not exploring or making import bookings but buying local scrap or sponge iron,” a source informed.
Domestic versus global prices
Domestic HMS 80:20 in Mumbai is currently hovering at INR 35,100/t DAP compared to the landed imported HMS (Dubai origin) price of $475/t CFR Nhava Sheva (INR 37,100/t). Thus, a disparity of INR 2,000-2,500 is still sustaining.
Earlier, in Jun’21, the average price gap between domestic HMS 80:20, exy-Mumbai and the landed cost of the same of Dubai origin was more than INR 3,000/t while in Jul’21, this climbed to INR 3,700/t. These figures were almost double the price spread of INR 1,600/t seen in May’21 and still higher than INR 1,800/t tracked in Apr’21.
Why are global scrap prices firm?
- Turkey’s rates have fallen by $10/tonne (t) in the last 10 days. However, traders are saying that a very sharp correction in global scrap prices is unlikely because of a rise in domestic demand in the exporting countries, which are keeping prices firm on their home turf.
- US scrap prices are moving up too. “US suppliers will not sell at a lower rate at present either and will raise their export offers,” informed a source.
- Neighbouring Pakistan is enticing sellers with higher offers of $525/t or $530-535/t CFR levels for shredded. Naturally, sellers are opting to sell in Pakistan rather than in India.
Indian offers
SteelMint learnt that no significant shredded bookings have taken place from India for the last one month. UK-origin shredded offers are at $530 CFR Nhava Sheva but bids are quite lower.
Indian mills are saying $525-530/t CFR levels are high. A mill in Chennai says, unless prices drop by $40-50 it will not be viable to make import purchases. However, getting such offers are unlikely since current prices of HMS to India are hovering around $480/t CFR.
Outlook
Indian mills are waiting for further corrections in imported scrap prices.
On the other hand, India needs to import 5-7 million tonnes (mn t) of scrap annually.
If domestic steel prices rise and production increases in tandem — and chances are it will since monsoon will start receding from Sept onwards — then mills may find themselves in a tough situation. They need to be armed with adequate scrap to increase production. But they have not made sufficient bookings over the past 2-3 months because of the price disparity. This scenario may lead to shortage of scrap inventory at mills which will support a rise in domestic scrap prices.
Prices as on 9:00 IST, 13 Aug. d-o-d changes indicated against closing price of 12 Aug. Rebar changes not indicated due to change in contract
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