Bangladesh prefers bulk ferrous scrap bookings. Will trend sustain?

• Bangladesh's bulk ferrous scrap imports rise compared to containerised
  
  
• Mills show preference for high-grade material
  
  
• Japan's domestic focus leads to bid-offer disparities, UK's comeback
  
  
• Container shortage leading to longer delivery period
  
  
• Quarantine rules causing container shortage
  
  
• Trend may sustain as mills seek raw material security
  
  

Morning Brief: Bangladesh has effected a noticeable shift towards bulk procurement of ferrous scrap from the earlier emphasis on containerised shipments.

Data received by SteelMint reveals that Bangladesh, a country entirely dependent on scrap for steel-making since it lacks its own iron ore mining resources, has been importing in the range of well over 3.5 million tonnes (mnt), at least since 2019. For instance, its total scrap imports in 2021 were at 3.95 mnt, up 5% over 3.76 mnt in 2020. Volumes in 2020, being a Covid-inflicted year, dropped y-o-y from 2019's 4.10 mnt.

The import market had traditionally been at 60% containerised and 40% bulk, the latter being mainly sourced from USA and Japan.

Japan's absence

However, Japan's domestic consumption started rising from last year, as its own economy revived post-Covid lockdowns. This led to an exports de-focus that created bid-offer disparities in the Bangladesh market, on the back of steep rise in Japan-origin material. Bangladesh consequently started sourcing bulk more from USA and the UK.

Also, Japan, which catered to 20% of Bangladesh's demand, has been less active in the market because the chip shortage has impacted its auto production, leading to lesser busheling generation.

Consequently, while bulk import volumes from USA have gained, Japan's has dropped. From 0.53 mnt in 2017, USA's share of bulk exports to Bangladesh rose to 1.35 mnt in 2021, whereas Japan's share, after rising to 0.82 mnt in 2020, tailed off to 0.38 mnt in last calendar.

Bulk gains share

However, there is now a pronounced emphasis on bulk with imports of the same rising steadily from a low of 1.02 mnt in 2017 to 2.43 mnt in 2021. The previous (2019) 40:60 bulk-container ratio has realigned to 60:40.

The UK, meanwhile, with nil volumes in 2020, resumed at 0.18 mnt in 2021. UK previously did sell, volumes gaining from a mere 0.3 mnt in 2017 to 0.28 mnt in 2019 till Covid struck.

Japan exported mainly busheling, which is expensive because of its high ferrous yield and is generally sold in small lots. Cargo from USA and UK comprise mainly a mixed bag of HMS 1&2 (80:20), shredded and occasionally P&S and bonus.

Why is Bangladesh shifting towards bulk procurements?

• Preference for higher quality material: Buyers are showing an increasing propensity for good quality scrap that USA, UK and Japan typically offer. "Quality of the material being shipped in bulk is reliable and can be inspected at the time of loading. This is a challenge with containers," informs a source.
  
  
• Raw material security: That apart, buyers want to secure raw material in bulk quantities. Leading Bangladeshi mills increased capacities lately and are regularly importing bulk cargoes. There is a certain amount of uncertainty associated with containers as deals are sometimes heard closed on the high seas.
  
  

Bulk from USA and UK arrive in vessels of 30,000-35,000 tonnes whereas a container ship can carry up to 24,000 teu. Japan's high-grade material, bought in smaller parcels, is transported in 5,000-15,000 t vessels.

• Container scarcity, longer lead time: The container shortage that surfaced in 2021 has been continuing with vessels facing congestion at ports due to quarantine norms. Container shortage has been most highlighted from Australia although it supplies low-grade scrap to Bangladesh.The shortage is extending the voyage time to 2-3 months while bulk is getting delivered within 35-40 days. Under Covid protocols, containers also require more time to unload compared to bulk. The congestion and longer turnaround are leading to higher demurrages, vessel hire charges and eventually freights for containers. Moreover, shipping lines are still rampantly rolling over or cancelling container bookings due to unavailability.That apart, bottlenecking and longer turnaround at Chittagong Port are adding to container woes.
  
  Outlook
  The container issue has not yet been resolved fully with newer Covid variants emerging and the quarantine norms persisting. On the other hand, buyers are keen to secure high grade material and would not mind paying higher. Based on these factors, Bangladesh's present leaning towards bulk cargo bookings will likely continue in the short to medium terms.