NEW YORK Bleak conditions in the finished steel
market coupled with a weak Indian currency have forced several
mills in India to cull production rates and scrap intake as
they look to weather losses, according to market
steel producers in India have lowered utilization rates to 50
percent or under as finished steel cries for demand, sources
A weak Indian rupee
and reasonably healthy scrap markets in the United States,
Britain and some parts of Europe have widened the bid and offer
gulf between exporters and importers and resulted in little or
absolutely no trade for more than a month.
Although the monsoon
season in some parts of India has resulted in a seasonal drop
in demand and production, conditions are direr than normal,
with production cuts more severe and demand from many smaller
producers a fraction of historical levels, sources said.
"With monsoon in full
swing and very less demand for finished products, the
long-steel products industry is doing really badly, with high
input costs and less margins for conversion and dull sales. On
average, furnaces are losing up to $30 to $35 per tonne on
conversion from scrap to billet at todays scrap prices.
But most are still receiving scrap which was purchased in May
and June at higher levels, so losses are even greater," one
importer in India said.
Several small furnaces
have already shut down or halved production, which is a
positive development in the longer term, he added.
"This is good for the
future of secondary steel manufacturers, as it will wipe out
excess capacity in the market and only bigger furnaces will be
viable in the coming year."
In northern and
western India very little scrap has been booked in the past
four weeks, with the only meaningful trades reported out of the
For small volumes of
containerized scrap, prices out of the Middle East were
reported as low as $320 for an 80/20 mix of No. 1 and No. 2
heavy melt scrap, with shredded prices at lows of $333 per
Other exporters said
uncertainty on prices had created wide trading ranges depending
on market of origin, destination in India, payment terms and
Prices for shred have
trekked between $333 and $376 per tonne delivered to India over
the past month, with HMS 1&2 (80:20) prices in a range of
$320 to $355 per tonne.
and U.S. offers for shredded scrap have stayed firm at around
$380 per tonne c.f.r. Nhava Sheva, although some shred was
reportedly sold out of Britain late last week at $376 per
tonne, according to an Indian trader.
In Chennai, the major
southern Indian scrap destination, an import of turnings
reportedly concluded at $335 per tonne, with No. 1 heavy melt
at $360 per tonne.
A few sources said
another issue for scrap exporters is the current availability
of prompt scrap in the South from traders who are offering
unsold scrap from previously booked cargoes and from steel
producers who shut down or curtailoed production but had
reasonable scrap inventory.
"Ready shredded was
sold at $330 per tonne and heavy melt from $310 to $320
depending on quality," a second source said.
"The market here
sucks," one U.S. exporter said. "Steel mills are running at 50
percent utilization and have a lot of finish inventory.
Thats the reason they are not buying at all. Also, there
is a liquidity crunch in the market. Everybody is waiting for
the rupee to strengthen, which will not happen in the short
run; and even if it does strengthen a bit, not much is going to
change for at least the next six months."
A second exporter said
weakening conditions had resulted in some contract
"There is no rationale
in the market for what price scrap should be purchased at since
demand is weak and theres plenty of abandoned cargo," he
exporters, however, have not suffered any major impact from the
lack of Indian demand, as they have found support from
consumers in Indonesia, Malaysia and Vietnam, AMM
With most sources in
the United States, Europe and India painting a poor picture of
what may come, only one U.S. exporter was more optimistic.
"My contacts feel
India will need to come back into the market soon no matter
what the rupee is doing. Inventories are very low and even
though the steel business is not very good over there, they
will need to buy some or shut furnaces down. I would say you
will see a $10 per tonne rise within the next two weeks," he