India's stainless steel scrap imports stagnate in FY'24, despite output increase. Know why?

• Stainless steel production rises over 20% in current fiscal
  
  
• Surge in semis, finished SS imports spoil scrap party
  
  
• BF-route capacity increase to impact SS scrap imports
  
  

Morning Brief: India's stainless steel (SS) scrap imports witnessed a slight uptick in financial year 2023-24 (FY'24). Data maintained with BigMint reveals SS scrap imports touched 1.30 million tonnes (mnt), marking a marginal 3% increase from the previous fiscal's 1.26 mnt. This limited growth can be attributed to a shift in preference towards semi-finished materials like slabs and billets -- driven by competitive pricing from China and Indonesia. Producers opted for these alternatives to optimize production costs.

SS production in FY'24

Notably, India experienced a significant 23% y-o-y increase in stainless steel production during FY'24, totalling 3.35 mnt compared to 2.74 mnt in FY'23. Finished flats production accounted for 2.34 mnt, with finished longs accounting for the balance 1.01 mnt.

Grade-wise imports

Within the scrap import landscape, Zurik grade shipments decreased by 6% to 0.26 mnt in the period under review (FY'24), while non-Zurik cargoes saw a 6% y-o-y increase to 1.04 mnt. Particularly noteworthy was the 36% rise in imports of the 400 series, which touched 0.13 mnt from 0.10 mnt in FY'23, propelled by industrial expansion and demand from automotive and food equipment sectors.

Country-wise shipments

As per country-wise shipments data, the United States remained the top exporter of stainless steel scrap to India, with shipments rising a modest 5% to 0.20 mnt in FY'24. Meanwhile, South Korea experienced a significant 37% increase in shipments to 0.12 mnt during the same period.

Why were scrap imports not as per expectations?

Since India's SS production increased over 20% in FY'24, the expectation was that SS scrap imports would also increase in tandem, or at least by 10-15%. This is because scrap is a cheaper alternative for producing stainless steel. However, the country saw only a nominal 3% increase in the same, as already mentioned.

Surge in semi-finished imports: There was a surge in imports of semi-finished SS products. India imported approximately 0.60 mnt of stainless steel slabs from January 2023 to February 2024, which significantly impacted scrap requirements for production via EAF and IF routes. Prior to 2023, slab imports were nil.

Influx of cheaper imports: Influx of cheaper finished SS products like hot rolled (HR) and cold rolled (CR) coils also impacted SS scrap imports. Such finished imports led to reduced domestic production and lower demand for imported scrap. Currently, imported HRCs/CRCs are lower by around INR 10,000/t ($120/t) compared to domestic prices of the same, offering buyers significant viability.

Preference for domestic scrap: Major stainless steel producers are favoring domestic scrap as price volatility, trade disruptions, and logistical challenges are frequently plaguing the imports landscape. Europe's domestic mills' buying prices remained relatively higher in the second half of FY'24 which led to lower supply of scrap in the export market.

Way forward

Expected expansions in production of crude steel through the blast furnace route will reduce imported scrap dependency. For instance, Jindal Stainless' 0.84 mnt crude steel capacity increase via the blast furnace route, will further decrease scrap dependency. The expected additional capacity via BFs is around 1 mnt by FY'25.

Going forward, scrap import volumes are expected to remain relatively stable due to the continued imports of slab and billets. While large-scale producers will possibly shift away from scrap, small-scale IF route producers are likely to persist in utilizing stainless scrap.