India: Domestic Scrap Prices Likely to Remain Under Pressure

In conversation with market participants, SteelMint learned that melting scrap prices in Indian domestic market is likely to remain under pressure in near short term. Melting Scrap which is the semi solid form of steel. Availability of melting scrap is strong amid poor lifting, this indicates about volatility or fall in domestic scrap prices.

Reasons which may keep domestic scrap prices under pressure:

Increase in bulk scrap imports:- As per data maintained by SteelMint stats, bulk scrap imports in India rose significantly along with surge in ship breaking volume.

As per data, India imported 2 bulk scrap vessels in Jun'19 total of 77,000 MT melting scrap, which was nil in May'19 and about 65,000 MT in Apr'19.

Similarly ship breaking imports surge in India and recorded more than 1,45,000 MT in May'19 & Jun'19 each month in comparison with 1,24,600 MT in Apr'19.

Falling Ingot/Billet production:- SteelMint learned that, recent close of around 15-20 furnaces in Gujarat has reduced production by 50%, these furnaces accounts for about 15% production contribution.

Similarly in Maharashtra few standalone & hot rolling mills are planing to reduce output to maintain supply-demand. Also as per sources, in Rajasthan there are limited furnaces operational due to high input cost.

Reduced scrap consumption:- Scrap consumption has been reduced among electric arc or induction furnaces in Western markets where the mills were melting close to 60-80% scrap and now are melting about 40-60% scrap due to high cost compare with sponge & pig iron.

As per Ingot/Billet manufacturers, as their steel margins fell they are melting more than 50% sponge and low cost substitutes in order to reduce input cost.

The current melting scrap (HMS 80:20) prices in western India (Maharashtra) is hovering at INR 22,500/MT, while landed cost of Sponge P-DRI (FeM 80%) reported at near to INR 18,000-18,500/MT. Hence the price gap between them is about INR 4,000-4,500/MT, which should be around INR 3,000/MT, as per producers.