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India's aluminium alloyed ingot imports surge 60% in H1CY24 amid scrap challenges

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Aluminium

BigMint Bureau

516 Reads

6 Aug 2024, 09:50 IST

India's aluminium alloyed ingot imports surge 60% in H1CY24 amid scrap challenges

Geopolitical issues impact trade, raise scrap prices

Costlier scrap encourages direct import of ingots

Outlook on ingot imports mixed in the short term
Morning Brief: India's imports of alloyed aluminium ingots surged 60% to around 112,158 tonnes (t) in the first half (January-June, 2024) of 2024 (H1CY'24). Volumes in the same period in 2023 were at 70,780 t.

Out of the total aluminium semi-finished imports into India (196,482 t) in H1CY'24, an overwhelming 62% accounted for alloyed ingots alone.

Why did alloy ingot imports surge in H1?

Red Sea crisis hits scrap imports: The crisis in the Red Sea, which began in October 2023 and subsequently escalated, caused a shipping crisis that severely disrupted global trade and supply chains. This particularly impacted routes through the Suez Canal, a critical artery handling approximately 30% of the 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 persistently disrupted global supply chains and led to squeezed profit margins.

Shipment delays also negatively affected imports of aluminium scrap into India, especially from the Middle East and the UK, which supply a combined significant 40-45% of India's total scrap volumes. The drop in aluminium scrap imports boosted the demand for semis like alloy ingots.

Imports of aluminium scrap, which is the key raw material for manufacturing alloy ingots, saw a notable 8% drop in H1 to around 809,100 t from 875,000 t in H1CY'23.

Scrap prices escalate amid shortage: Persistently delayed shipments of aluminium scrap caused alloy manufacturers to source scrap domestically, which led to depletion of inventories of the same. This scenario created a shortage and put an upward pressure on domestic as well as imported scrap prices, eventually leading to higher alloy imports.

Thus, demand for aluminum alloys remained strong, driven by robust order books from the automotive and aviation sectors. In a spin-off effect, prices of some scrap grades used in aluminium alloy production escalated.

Russian sanction impacts LME aluminium, scrap pricing: LME aluminium prices witnessed a notable increase in April 2024 which continued till May, peaking at $2,610/t, propelled by the western sanctions on Russian metals. These sanctions were 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 and further exerted an upward pressure on imported scrap prices. All grades of scrap spurted to over $2,000/t.

This prompted aluminium alloy manufacturers to import alloy ingots directly instead of buying scrap from overseas at higher prices for manufacturing the same at home.

Aluminium scrap and ADC12 price trends in H1

Key imported grades rise 4-7%: According to BigMint's analysis, in H1CY'24, average prices of key grades like UAE tense (8-9%), CFR Mundra, stood at $1,820/t, marking a 4% increase y-o-y. UK zorba averaged $2,064/t, reflecting around 7% increase over the same period in 2023. Additionally, other grades such as UAE taint tabor and extrusion saw an approximate 4% y-o-y increase in H1CY'24.

Domestic scrap rises 9%: In H1CY'24, Delhi tense scrap prices rose 9% to INR 177,280/t, from INR 162,130/t in H1CY'23, as per BigMint assessment.

Non-OEM ADC12 up 6%: The non-OEM prices of ADC12 in Delhi stood at INR 208,067/t, up 6% in H1CY'24 from INR 196,450/t in H1CY'23.

Outlook: The short term looks mixed. Prices of imported alloy ingots, which substitute domestic ADC12 material, may see a decline since the domestic counter-part has seen a downward correction.

However, wheel-grade (A356) ingot imports, which see limited domestic production, may continue.