NEW YORK The weakening of the Indian rupee against the dollar brought containerized ferrous scrap exports to India to a complete standstill this past week.
Poor demand from Indian mills, the recent introduction of an import duty and elevated currency exchange rates had culled exports to India by nearly 75 percent a week ago, according to some sources.
Since then, the rupee deteriorated from R55 to the dollar to almost R60, completely halting container exports to India from the United States, the United Kingdom and continental Europe.
The last reported sales of containerized shredded scrap were concluded about seven to 10 days ago in a range of $368 to $370 per tonne c.f.r. Nhava Sheva, with heavy melt about $20 lower.
However, bids and offers have since moved in opposite directions as strengthening prices to Turkey encouraged sellers to raise their offers by about $5 per tonne while a weakening Indian currency forced Indian buyers to lower bids by about $10 per tonne, according to various sources.
This development has frozen trading and forced U.S. exporters to look to other markets. "We have shifted our focus to Indonesia and Pakistan," one U.S. exporter said. "Indonesian mills are paying $373 to $375 per tonne c.f.r. for shred, and the freight to them is lower than that to India. Pakistani mills are paying $5 above that range. We have no sales to India."
Some sources suggested that current Indian bids are between $355 and $365 per tonne, with no exporters ready to bite, while others said there were no firm bids.
"Today, no one will buy even at $365 as pig iron is a far more viable option," one trader in India said.
A second trader said there were absolutely no bids from Indian mills at the moment. "With the devaluation in (the) rupee, even these prices appear difficult to achieve now," he said. "There are no bids. Every buyer is in a wait-and-watch mode. The dollar has appreciated from 55 to 60 in a few weeks. However, finished product sales prices have not increased by even a rupee. I believe rather than buying raw material, the remelters will now focus on increasing prices of finished product."
A third source in India said part of the demand deterioration is seasonal. "Indian mills are not buying anything due to a strong dollar, dull demand for finished products and huge conversion losses," he said. "Usually during the monsoons this is the scenario, and I guess it will take at least two months for Indian mills to get back to normal buying. Many mills are cutting their production and some are also shutting down."
A fourth India-based source agreed. "Most mills have cut back production due to slack demand of finished goods," he said. "Prices for shredded in the international market (in the) past week to 10 days were around $368 to $370 c.f.r. Nhava Sheva, but with recent deals in Turkey and U.S. domestic showing a bit of strength, foreign sellers are trying to push through price increases for July. (Its) very doubtful Indian steel mills will pay any price increase as of now."
One United Kingdom-based exporter said currency exchange rates are a clear red flag for Indian buyers currently. "We are seeing the Indian rupee touch 60. This is a big dont buy signal for the Indian guys," he said. "There was some really low prices knocking around, but we dont know of anyone that sold. I think the general view is the market has bottomed.