India's ferrous scrap imports spurt 50% in H1FY24 amid global demand slump

• Suppliers divert material to India as Turkiye sees drop in demand
  
  
• Strong domestic steel consumption keeps scrap procurement firm
  
  
• Higher domestic scrap prices make imports more viable
  
  

Morning Brief: India's ferrous scrap imports increased a sizeable 50% y-o-y to 4.44 million tonnes (mnt) in the first half (April-September) of the current fiscal of 2023-34 (H1FY24), from 2.96 mnt recorded in the same period last fiscal.

Top exporters

Among the leading four countries exporting ferrous scrap to India in H1FY24, the top two were the usual suppliers -the United Kingdom with 0.71 mnt (0.25 mnt), and the United States with 0.69 mnt (0.32 mnt). However, Poland exported a noteworthy 0.27 mnt (0.05 mnt), while Brazil's volumes were at a considerable 0.20 mnt (0.03 mnt). The UK saw a whopping 182% increase, and the United States an equally robust 119% spurt. However, volumes from Poland increased a humongous 419% although on a comparatively smaller base. Ditto for Brazil, which surged 609%.

Top unloading ports and ICDs

The top three unloading ports were Chennai (0.82 mnt), Mundra (0.48 mnt), and Nhava Sheva (0.32 mnt) In fact, Chennai and Mundra are traditionally prominent ports for imported scrap and both indicated y-o-y growth in H1. While volumes at Chennai Port grew 18%, Mundra saw a 12% increase.

JNPT(Nhava Sheva port) experienced a slight increase of 3%, maintaining its importance as a trade hub.

Kandla(0.28 mnt) demonstrated a 51% growth, making it a key port to watch out for in the ferrous scrap space.

Ludhiana ICD (0.40 mnt), Chawapayal ICD (0.39 mnt), Kilaraipur ICD (0.23 mnt), and Nagpur ICD (0.11 mnt) experienced substantial growth, reflecting increased regional activity.

Factors which pulled up India's ferrous scrap imports in H1

Turkiye loses appetite, Indian buyers benefit: Lack of buying from Turkiye, the largest scrap consumer globally, was a major reason for increased diversion of material towards India. It experienced y-o-y slower domestic crude steel production rates amid challenges such as high inflation and hiked interest rates which put Turkish mills in a disadvantageous position. As a result, Turkiye's ferrous scrap imports dropped around 8.5% y-o-y to 9.4 mnt in April-September 2023, leaving traditional suppliers like the UK and the US saddled with inventory. Indian mills, sensing an opportunity here, extracted good prices in the process.

Thus, ferrous scrap imports from the UK not only rose 182% in H1, prices also dropped considerably. For instance, UK-origin shredded (in containers) were available at $458/t in April 2023 against $644/t in April 2022, declining by $186/t y-o-y. September 2023 prices hovered at an even lower $431/t compared to $458/t in September 2022, a $27/t drop y-o-y and since April 2023.

In a similar vein, the United States remained a major source for India, with a 119% increase. Here too, price viability played a huge role, especially for grades like HMS (80:20) and shredded in bulk volumes. Prices of US-origin shredded (in containers) were offered at $450/t in April 2023, which dropped to $426/t in September 2023. April and September 2022 prices were at $638/t and $453/t respectively.

South Asia: Two key South Asia buyers, Bangladesh and Pakistan, who habitually bought 3-4 mnt per annum in the past, have seen their volumes dwindling on account of sliding currencies, inflationary pressures, and clamp-downs on new letters of credit (LCs) as the respective governments want to pull the brake on already depleted forex reserves.

Bangladesh's total bulk scrap imports in April- September 2022 were at 1.91 mnt, while the volumes for the same period in 2023 reduced to 1.71 mnt, marking an almost 11% decline y-o-y.

Notably, Bangladesh showed a propensity to buy a significant portion from Japan in the last 4-5 months due to the latter's price competitiveness and shorter shipment durations.

In the case of Pakistan, in H1FY24, provisional data (excluding September) indicates a 31% y-o-y drop, with last month's figures still pending.

Dull demand from South Asia also escalated the inventory burden for UK and US suppliers and made them turn the spotlight on India.

Strong domestic steel demand: Strong domestic demand for steel kept scrap consumption strong in India. As per JPC data, India's steel consumption increased 15% over April-September 2023 to 64 mnt (56 mnt). Demand from projects, pre-engineered buildings, and automotive steel was good in the period being considered.

Rising domestic scrap prices: Domestic scrap availability was scarce in the last many months because of GST raids to weed out illegal local transactions, a factor that raised prices too. This made them costlier compared to the imported material. For instance, imported HMS 80:20 from Europe hovered at around $439/t in April 2023 but dropped to 416/t in September 2023 ($23/t down).

On the other hand, the DAP price of domestic HMS 80:20 from Mumbai ruled at $458/t in April and dropped by merely $17/t to $442/t in September 2023, rendering imported material cheaper compared to domestic in H1.

Even after the addition of inland freight, imported remained viable by $3-4/t.

Imports from the UAE drop 76%

The United Arab Emirates, on the other hand,was the sole country that witnessed a substantial 76% decrease in exports to India at 0.14 mnt, signifying a decline in trade activities after it imposed the scrap export ban in a protectionist stance.

Outlook

Ferrous scrap imports are expected to continue their upward trend in the coming months, as the Indian steel industry continues to grow.

Domestic scrap availability, which was tight, especially towards the end of H1 is easing now, a fact that is getting reflected in the decreasing prices. This graph may drop further in the short to medium term with the monsoon on its way out, which will facilitates better generation and collection.