NEW YORK A tumbling rupee has severely impacted ferrous scrap exports to India, bringing U.S. shipments to the country to a complete standstill.
Market participants said Indian mills have not booked any U.S. scrap for at least the past two weeks, while exports from Europe also have fallen dramatically to barely a few containers.
With the Indian currency falling to historic lows against the dollar on a seemingly daily basis for the past few weeks, several small steelmakers have been forced to close shop, sources said.
"We have not bought scrap from the U.S. for the past three weeks and this has never happened in my seven years of working in this industry, so you can imagine how bad the India market is," said a source at one of Indias larger scrap companies.
U.S. exporters and traders said demand from India has been poor for several months, but the plummeting rupee obliterated any trade in recent weeks.
Indian buyers of heavy melt steel have released bids between $310 and $340 per tonne for scrap delivered to India to compensate for the weakening rupee, but they are significantly below U.S. offers, which reportedly are at least $40 above that range.
The little that has sold into India has come mostly from Dubai, Africa and the Philippines in the past few weeks. One exporter said that even Dubais exporters have turned their attention to Indias neighbor, Pakistan.
Extremely small volumes of shredded scrap reportedly have sold from Europe at around $375 to $380 per tonne c.f.r., sources said.
"Things are not looking very good in India due to poor demand, high currency rate and sick government policies. Most of the small plants in India are getting closed down or operating below 50 percent of capacity," a source at another large Indian scrap company said. "There is no containerized cargo movement to India and the reason is a strong U.S. domestic market and the long transit time, which buyers want to avoid due to a highly fluctuating rupee. Currently, India is surviving on Middle East and Africa due to short transit period and cheap material availability."
Sources said that a recent meeting between Metal Recycling Association of India (MRAI) representatives and senior government leaders would do little to alter the course. The meeting followed a letter MRAI sent to Indias prime minister requesting removal of recently introduced duties on some ferrous and nonferrous scrap imports.
One U.S.-based exporter said Indias import duties are a minor issue at the moment. "To be honest, the import tax issue is not the problem," he said. "If the rupee was at normal levels, the Indian market would be buying. At the end of the day, their buying power is awful and with interest rates the way they are there it doesnt allow them to hedge. The people who are making a killing are the ones buying finished casting and other finished goods out of India right now."
One European exporter said banks have started freezing credit from customers, while a London-based exporter said he expects many more closures of small induction furnaces in India. "The bigger electric-arc furnaces will survive on sponge iron and limited scrap supply," he said.
An importer in India was the sole optimist in the marketplace. "I think the worst is over and soon the prices of finished products should start improving in India," he said. "On the international front, I believe prices should correct a bit and hence Indian mills, which have not bought anything for over a month now, should start buying aggressively in another two weeks."