India: Tata Steel enters domestic scrap buying; prices may stay firm

In an unusual move, Tata Steel, for the first time, was heard to be buying prime quality melting scrap from the merchant market, a move that can propel domestic scrap prices to stay on the higher side.

The company so far has been importing scrap through tender since the last couple of years, mainly for its Bhushan Steel plant, which does run on an electric arc furnace.

But reliable sources informed SteelMint that since the last one month, the company has been sourcing 10,000-15,000 tonnes of prime quality scrap for its Jamshedpur plant from the merchant market.

It is not yet clear for how long the sourcing will continue. However, a source informed that Tata Steel was "trying to import PNS and new production of bushelling through tender but international prices for these grades are too hot, leaving Tatas with no option but to increase domestic buying".

It was heard that the company has appointed suppliers to lift the material on its behalf and that most of the sourcing is being done from SAIL's Bhilai Steel Plant and other mills located in the Raipur and nearby region.

In one particular deal, the company was heard to have bought 250-300 tonnes of high quality material from a private mill through a trader at INR 38,500/t ex-Raipur (excluding GST) plus freight.

It was also learnt that the company is preferring end-cutting, primarily rail cuttings of 3-4 metres, where the supplier will shred/cut to smaller pieces and offer (otherwise, the shredding at the plant will increase the processing cost for any mill). "There is a preference for high carbon material and thus, the company is mainly opting for bloom and rail cuttings, which are harder categories," informed a source.

But, importantly, the sources revealed that 10,000-15,000 t is a largish quantity to be lifted every month, especially since this comprises high quality end-cuttings. "Lifting on a regular basis of such high-end material and from a region nearby to the plant has not generally been seen previously," the source added.

SAIL BSP, in its defective auctions in Jun sold 50,000 t, around 61,600 tonnes in May and 10,000 t in Apr.

Outlook

Traders also informed that Tata Steel is now likely to regularly participate in such auctions through its sourcing partners which would keep domestic scrap price on the higher side in the upcoming auctions.

"They will consume more scrap going forward (am sure) to reduce the carbon footprint," the source added.

Also, steady procuring from the merchant market could lead to supply tightness, supporting firmer prices. SteelMint's domestic scrap index was at around INR 37,400/t DAP Mandi Gobindgarh on 22 Jul'21.

Prices as on 9:00 IST, 23 Jul. d-o-d changes indicated against closing price of 22 July