India grapples with falling imported aluminium scrap prices amid multi-month lows in LME prices

India has seen a notable decline in imported aluminium scrap prices w-o-w, attributed to a decrease in LME aluminium prices. Prices for all grades have fallen by up to 6% this week, leading to market uncertainty and a cautious approach among market participants.

In addition, the Indian market experienced reduced activity following the presentation of the interim Budget for financial year 2025 (FY'25) in Lok Sabha today. Market participants were awaiting further details regarding the budget changes for FY'25. However, the import duty for aluminium scrap imports has remained unchanged at 2.5% for FY'25. Similarly, the duty on copper scrap also remained unchanged. Meanwhile, the Basic Customs Duty on silicon metal (HS: 28046900) has been reduced to zero from the previous 5%.

Meanwhile, three-month LME aluminium prices were at $2,300/t, down 4% w-o-w. Stocks at LME-registered warehouses stood at 970,725 tonnes (t). Aluminium prices reached a three-month low amid increased output from major producers. China's June aluminium output hit record highs, supported by profit margins and an ample hydropower supply.

According to BigMint's assessment, tense scrap from the Middle East, particularly the UAE, saw a decrease of $80/t, settling at $1,790/t. Zorba 95/5 from the UK also decreased by $40/t to $2,000/t CFR West Coast, India.

Meanwhile, India's imports of aluminium scrap stood at 167,641 t in June 2024, moving up marginally by 4% m-o-m from the previous month's 161,644 t.

Market response on crashing prices

A trader source mentioned, "Budget-wise, there have been no changes affecting aluminum players, but the market is currently slow with liquidity issues. There are no firm offers, and both buyers and suppliers show little interest in transactions. Market conditions lack clarity, with some suppliers quoting unfeasibly high prices, while bids are notably $60-$80/t lower than expected."

Wheel scrap originating from the UK has witnessed very low bids, the bid levels are almost at LME (-$100/t) standing at $2,200/t, CFR Mundra. However, the offers are heard at $2,250-$2,260/t levels.

Currently, large-scale alloy manufacturers are the primary purchasers of scrap, albeit at a reduced pace. Small and medium-scale manufacturers have temporarily suspended scrap procurement.

Furthermore, after the Muharram holidays, the Middle East market has failed to gain momentum. Market participants anticipate a further decline in LME aluminium prices, adding pressure on imported scrap prices. This situation is exacerbated by the onset of the monsoon season in various parts of India, which could further disrupt trade.

China's silicon market

Prices of China's silicon 553 have dropped $60/t reaching $1,840/t CFR Mundra amid easing freight rates. However, buying interest has stayed low because major aluminium alloy manufacturers have sufficient silicon supplies leading to reduced market activity.

Additionally, the freight rate from China to Mundra was heard at $3,000-$3,200 per 20-foot container.

Domestic scrap market

In the domestic market, tense scrap prices have decreased by INR 2,000/t in both Delhi and Chennai. According to BigMint's assessment, domestic tense scrap prices are now at INR 178,000/t ex-Delhi NCR and INR 179,000/t ex-Chennai. This decline aligns with the falling LME aluminium prices and sluggish market trends.

Budget FY'25 updates