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US scrap prices to India sink on slack demand

Keywords: Tags  United States, containerized ferrous scrap, India, export

NEW YORK - A near-standstill in demand for containerized ferrous scrap from India has sent U.S. containerized export prices to the country down significantly.

The recent introduction of an import duty on ferrous scrap shipped to India (, May 9) has weakened sentiment, but many market participants suggest the fallout on prices from this trade barrier will be short-lived.

Sources pegged containerized shredded scrap trade at $385 to $390 per tonne this past week for scrap delivered to India’s western port of Nhava Sheva, with bids and offers reported within $5 of that range. Very little has reportedly traded in this price range, which is down about $20 from late-April levels (, April 30). One Indian importer reported a purchase of containerized shredded scrap at $380 per tonne c.f.r. Nhava Sheva, while a source at a large exporter suggested that $380 per tonne appeared to be the next price level.

The coming week would bring clarity on price direction, market sources said, but many were divided as to what impact the 2.5-percent import duty would have. Some said it had paralyzed demand from India, while others said it had a minor impact in a market that is still suffering from weak production levels due to poor demand for finished products.

“The buying has slowed down due to various reasons and not just the import duty,” a second Indian exporter said. “Yes, the import duty does have an effect on buying price, but in a few days the impact gets absorbed. The factories have pressure on conversion margins and hence they are cutting production to minimize their losses, as they have been losing money for quite a few months.”

The Indian government introduced the tax in an effort to boost consumption of domestically produced direct-reduced iron (DRI), known in India as “sponge iron,” market participants said.

A scrap buyer for a larger Indian steel producer said that complaints about the import duty were misplaced. “Every end-user will complain to anyone who will listen about the duty, but what is the alternative? DRI can only be used so much to replace scrap. And they would need to change their product portfolio slightly,” he said.

“Domestic sponge iron manufacturers are having a field day and have raised prices of local sponge iron, (and) there is pressure on international scrap suppliers to reduce prices further,” a Mumbai-based trader said of the duty’s impact.

A large exporter of European scrap said the impact would vary for each buyer. “High-end producers will be able to absorb it and should be able to pass it on,” he said. “Ingot guys will have difficulties (absorbing) it, although later on it will be considered in the price calculation. Demand is moderate, but confusion in the international market is causing many customers to hold their position.”

A fifth India-based source said that poor market conditions have hurt scrap demand.

“Steel offtake is poor, the dollar is stronger and the euro is weak,” he said. “Speculation is that scrap prices may soften further. The import duty further dampens sentiment. U.S. markets are also pretty soft and offering lower rates.”

The Indian market went silent after the import duty was announced, one U.S. exporter said. “Immediately after the announcement that the duty had been enacted, offers disappeared and prices dropped $10 to $20,” he said. “Offers have returned slowly, however, (but are) still way below domestic pricing.”

Another U.S. exporter expects the duty to have a short-term impact on buying strategies. “In the long run, the duty will be absorbed and the buyers will pay the ‘market’ if they want and need to purchase material,” he said. “The bottom-feeders are beginning to come out and I have received numerous calls ... inquiring about material. We do not like the price and have countered, but at this point, no takers.”

Meanwhile, sources expect very little demand for container scrap from India’s eastern port region of Chennai due to the imminent arrival of two bulk vessels and continuing production issues due to poor power supply.

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