India sees 8% drop in aluminium scrap arrivals in H1CY'24 amid geopolitical tensions

• Aluminium scrap imports fell by 8% in H1CY'24
  
  
• Imported scrap prices rise due to higher LME prices, delayed shipments
  
  

In the first half of calendar year 2024 (H1CY24), India's aluminium scrap imports fell by 8% compared to the H1CY'23. On a m-o-m basis, the imports rose marginally by 4% in June 2024. However, imports were up by 15% in June 2024 compared to the same period last year, according to provisional data from BigMint.

The import volume dropped to 809,102 t in H1CY'24 in comparison with H1CY'23 at 874,868t. Meanwhile, India's imports of aluminium scrap in June 2024 reached 167,641 tonnes (t), indicating a slight improvement compared to the previous month's 161,644 t.

What drove scrap imports low in H1CY'24?

• The impact of Red Sea issue
  
  

The crisis in the Red Sea, which began in October 2023 and escalated through December 2023, has caused a shipping crisis that severely disrupted global trade and supply chains. This has particularly impacted routes through the Suez Canal, a critical artery handling approximately 30% of global container trade. As a result, trade volumes were significantly reduced in early 2024.

Ships were forced to detour around Africa's Cape of Good Hope, increasing both shipping and insurance costs. Furthermore, the delayed delivery of goods has persistently disrupted global supply chains. This disruption has narrowed profit margins and made it impractical to export many low-profit items from their current operational locations.

The shipment delays also negatively affected the import of aluminium scrap into India, as a significant portion of these scrap grades typically originate from the Middle East and the UK region. This region accounts for approximately 40-45% of India's total scrap volumes.

• Russian sanction impacts aluminium pricing
  
  

In H1CY'24, LME aluminium average prices rose to $2,403/t, marking a 2% increase compared against H1CY'23 at $2,362/t. Meanwhile, stocks witnessed a rise of 33% in H1CY'24 to 6,95,372 t from 5,20,905 t in H1CY'23.

LME aluminium prices witnessed a notable growth in April 2024 which continued till May touching the peak of $2,610/t, propelled by the sanctions on Russian metals. These sanctions are designed to cut off a significant revenue stream for Russia, which has been supporting its military activities in Ukraine through metal exports. This geopolitical development introduced uncertainty in global supply and demand dynamics, but by late June 2024, prices had eased to around $2,550/t.

Meanwhile, there was a notable rise in stocks, which was a reaction to the LME directive to exclude all Russian-produced aluminium, copper, and nickel from its system starting from 13 April. The bulk of the increase in aluminium inventory occurred at LME-registered warehouses situated in Port Klang, Malaysia. This uptick, reportedly influenced by substantial financial maneuvers orchestrated by trading firms and warehouse operators, highlighted the pivotal role these entities play within the industry.

Imported scrap price trends

Imported scrap has become more expensive, exacerbated by delays in arrivals and the rise in LME aluminium prices following sanctions on Russian products, posing compounded challenges for India's recyclers. The escalating costs of scrap and the declining values of refined metals have significantly diminished the profitability of recyclers, prompting them to consider increasing the proportion of primary metal in their raw material mix.

Demand for aluminum alloys remains strong, driven by robust order books in the automotive and aviation sectors, contributing to price increases for major scrap grades used in aluminium alloy production.

According to BigMint's analysis, the average prices in H1CY'24 for key grades like UAE tense (8-9%), CFR Mundra, stood at $1,820/t, marking a roughly 4% increase compared to the H1CY'23. UK zorba averaged $2,064/t, reflecting a roughly 7% increase over the same period in 2023. Additionally, other grades such as UAE taint tabor and extrusion saw an approximate 4% increase in the first half of calendar year 2024 compared to the same period last year.

Grade-wise, region-wise imports

Discussing the top grades imported, taint tabor led the way with 178,282 t, followed by zorba at 169,617 t, extrusion at 141,194 t, tense at 110,368 t, talk at 41,651 t, and other grades at 167,989 t in H1CY'24.

In H1CY'24, the northern region recorded the highest scrap imports, reaching 366,140 t, followed by the west with 292,658 t, the south with 125,778 t, and the east with 24,501 t.

Country wise imports

In H1CY'24, country-wise imports showed a slight improvement, with the US (361,297 t) being the largest supplier followed by Saudi Arabia (192,088 t) and the UK ( 79,949 t), and the UAE (79,648 t), the Netherlands (58,648 t). Imports from other countries totalled up to 69,577 t.

Outlook

Looking ahead, there is anticipation that India's aluminium scrap imports may improve, as scrap prices are expected to slightly decrease. However, uncertainties persist regarding LME aluminium prices due to ongoing volatility in global market sentiments.