India's aluminum scrap imports rise in Mar'23. What to expect in near term?

• Lower domestic availability and higher scrap prices boost imports
  
  
• India's auto production supports higher alloy ingots usage
  
  
• Short-term demand may be muted as autos prepare for BS6.2 compliance
  
  

Morning Brief: India's aluminium scrap imports rose 25% to 0.15 million tonnes (mnt) in March 2023 against 0.12 mnt in February 2023. On a y-o-y basis, the increase was 19% compared to 0.13 mnt seen in March 2022.

Zorba and Taint Tabor (TT) made up the lion's share of about 65% of the total in March 2023. These two varieties are used mainly in producing automobile alloys.

TT is used in manufacturing flat aluminium products although it can also be used in making automobile alloys.

Import volumes over January-March, 2023 were up 7% to 0.43 mnt compared to 0.40 mnt in same three months in 2022.

Top exporters in March

The United States and the United Kingdom were the top two exporters to India over January-March 2023.

The top scrap exporter to India was SIMS Global with almost 16,000 tonnes (t), followed by European Metal Recycling (EMR) with nearly 10,000 t. GP Harmon Recycling LLC was a close third with around 9,000 t, followed by US-based Daiki International Trading Corp (over 8,000 t) and the Al Qaryan Group (4,500 t).

Top importing regions

In March, 2023, India's northern region remained the top importer with 69,081 t, up from 48,932 t in February, on the back of increased capacity utilization at mills.

Why did India's aluminium scrap imports show a rising trend?

LME scrap prices increase: Prices of aluminium scrap on the London Metal Exchange (LME) increased to around $2,655/t levels in the third week of January from $2,255/t in the first two weeks of the month. SteelMint's assessment of Zorba 95-5 of UK origin increased to $2,050/t from $1,940/t and Tense of Middle East origin increased to $1,910/t from $1,790/t CFR in this period. The increase prompted buyers to aggressively book imported materials in apprehension that prices could further head north.

Exports of semis, finished rise: The country's exports of semis and finished aluminium rose m-o-m to 0.21 mnt in March 2023, from 0.19 mnt in February, leading to high raw material usage and hence, higher imports of scrap. Domestic material availability was limited during January this year, contributing to the rise in imports.

Domestic scrap prices rise: Imports were further supported by an increase in domestic prices of aluminium tense scrap. Exy-Delhi prices rose 9% m-o-m to INR 162,285/t in January 2023 from INR 148,727/t in December 2022, which also led to stronger prices for semi-finished ie, aluminium ingot ADC12. Exw-Faridabad scrap prices rose 5% m-o-m to INR 194,000/t in January against INR 184,500/t in December 2022.

Boost in auto production: In March 2023, India's auto production (excluding commercial vehicles) experienced a significant increase, rising to 2,004,592 units compared to 1,754,922 units in February. The boost in production was likely due to the approaching financial year-end.

Capacity expansion by automotive major Maruti and other players based in the northern region also led to higher requirements for aluminium alloys, which translated into higher scrap (raw material) imports.

Outlook

Demand for aluminium alloys may stay moderate in the upcoming month since automakers are preparing to manufacture vehicles that will comply with the BS6.2 standards. The Chinese demand, which may also remain muted, will also be a factor to watch out for.