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Indonesian scrap importers turn away from HMS

Keywords: Tags  Indonesian scrap, scrap imports, ferrous scrap, heavy melt scrap, shredded scrap, prime industrial scrap, plate and structural scrap, premium scrap weilyn loo

SINGAPORE — Indonesian scrap importers and traders are shying away from deals involving heavy melting scrap (HMS), and are instead buying shredded scrap.

The switch was prompted by tighter regulations on the import of scrap materials, and particularly a lack of clarity over what constitutes impurities, following the seizure by Indonesian customs a year ago of thousands of containers carrying ferrous scrap due to alleged contamination.

HMS cargoes that had taken just a couple of weeks to clear customs now can take as long as 60 days, one Singapore-based scrap trader told AMM sister publication Steel First.

Selling HMS cargoes to Indonesia is no longer "a viable option (financially)," he said, citing detainment and port charges that accumulate each day that an HMS cargo is held awaiting clearance. Importers want these potential costs to be factored into the purchase price, making such deals unviable, he said.

On the buyer’s side, there is uncertainty over whether the HMS cargoes will be cleared, sources said.

"For companies that have an import license, basically they are only able to import shredded scrap without any problem. Other than shredded, there will be a strict inspection and no guarantee that the scrap will be released," said an Indonesian source operating a melt shop in Gresik, East Java.

"The problem is still on the regulation, since they don’t allow any impurities. How can we import such scrap without impurities?" he said, echoing the sentiment of many market participants.

Impurities mean anything that isn’t steel scrap, he said, noting that authorities can call just a drop of oil an impurity and a hazardous material.

Thus, importers are turning to shredded scrap, as well as "premium scrap" like plate and structural, said another Singapore trader who has switched to shredded and prime industrial scrap from HMS.

Prime industrial scrap is favored by steel mills because of its low impurities and high yield during production.

Prime scrap usually sells at a big premium over HMS and shredded scrap when the steel market is strong, but it sells at only a moderate premium in a weak steel market.

The price gap between shredded and plate and structural scrap has narrowed in recent months, making the latter more affordable, the second Singapore-based trader said.

The Indonesian Iron and Steel Industry Association couldn’t be reached for comment.

A version of this article was first published by AMM sister publication Steel First.

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