- Indian importers book over 160,000 t ferrous scrap last week in bulk
- Imported prices currently lower than domestic scrap
- Further bookings look dim as imported prices show uptrend
Morning Brief: Indian ferrous scrap buyers have suddenly upped their active bulk bookings. Four recent consignments were booked for August delivery last week.
A total volume of 160,000 tonnes (t) were booked, two of which are destination Chennai and the balance two, headed for Gujarat. Two are of US east coast origin while the other two are Europe-sourced. One each from the US and Europe are going to both destinations. Each parcel is 40,000 t at prices ranging from $366-415/t.
It may be noted that historically India is not a huge buyer of bulk ferrous scrap. In its entire annual scrap import volumes of 4-5 million tonnes. However, the four recent bookings in a single month have made the industry sit up and take note.
Factors that propelled the spurt in bulk bookings
Sellers seek alternate markets as Turkey lowers procurement: Turkey, the world’s largest consumer of ferrous scrap, showed a drop in procurements of late since it was busy buying large volumes of billets at highly competitive prices from Russia. As per SteelMint’s data, Russian billet prices had dropped more than $85/t FOB m-o-m. This prompted the global ferrous scrap producers, saddled with inventory, to scout for other markets, India being one.
Obviously, the inventory pressure forced the sellers to offload the material at attractive prices which lured Indian buyers. For instance, the average container prices of Europe-origin HMS 80:20 are currently at $410/t. But bulk prices are averaging $385/t, offering buyers a benefit of $25/t at present.
Imported scrap more cost-competitive: Landed cost of imported ferrous scrap prices are relatively cheaper compared to domestic material. The current spread between landed cost of imports versus domestic material is hovering at INR 35,414 ($ 448), against INR 37,600 ($476) in a normal scenario.
Mills are keen to book domestic cargoes for two reasons: One, in domestic they will receive prompt cargoes rather than depend on imports which will get delivered a couple of months later. Two, with the rupee sliding consistently against the dollar, prices are volatile. “There is the currency depreciation risk which will make imports more expensive, especially these being open-ended cargoes. Thus, mills are preferring to pay more for quicker deliveries and cut out the currency depreciation risk,” a source indicated.
Maruti’s recent auction of its CR busheling is an indicator of northward-headed domestic scrap prices. It concluded at a price of INR 46,720/t ($591/t) which is INR 2,300/t ($29/t) higher than that of the previous auction.
On the other hand, imported shredded in bulk consignment is available at an average $385/t. With the spread between imported and domestic having widened, traders are finding it advantageous to take positions on the former, which will be delivered a couple of months later. An additional bonus for traders is that container freight rates are still high, compared to bulk, allowing the latter to be more economical.
Delivery to coincide with peak manufacturing season: The delivery of the four cargoes is slated to happen in August, the peak period for manufacturing construction steel, which will be required post-monsoon. The third and fourth quarters see heightened construction activity in India
Outlook
These four cargo volumes may be a flash in the pan in the short term. Further bulk bookings in July look dim as ferrous scrap restocking demand in Turkey has set in ahead of the upcoming Eid festival, which is driving up imported shredded prices. These have already inched up $10-15/t.
Moreover, sponge iron prices will remain supported by the high thermal coal prices with the portside RB2 variety imported from South Africa hovering at around INR 18,000/t. These coal prices may be a tad lower from INR 21,000/t touched around a month back but are still high compared to the INR 10,000/t levels of January 2022. This, in turn, will also keep ferrous scrap rates firm.
Electric furnaces usually use sponge and scrap mix in the ratio of 65:35.
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