NEW YORK Prices for containerized ferrous scrap exported to India are under pressure as poor demand and currency markets sent prices lower over the past few weeks.
A seasonal decline in steel production, and consequently scrap demand, has combined with sharp drops in local prices of sponge iron and other raw materials and led to softer scrap tags, market participants said.
Buyers and exporters said volumes of containerized shredded scrap shipped to India over the past month have fallen sharply. They put prices at $385 to $395 per tonne c.f.r. Nhava Sheva this past week, down $5 to $10 per tonne from a month ago.
Many expect falling raw material prices to also impact finished goods prices in India during August, with a rebound expected only in September.
"I would say the local scrap prices in India will further soften in August, putting pressure on imports. The billet and rebar prices in India should go down by 1,000 (rupees, or $16.67) per tonne more in August," one exporter said. "The Indian market is always slow during June, July and August because of monsoons. There is less construction activity, so there is less sale of rebar. Mostly all the scrap-based furnaces are manufacturing rebar or construction steel. Flat products are being manufactured mainly by primary producers, who use iron ore for steelmaking instead of scrap."
The market has been extremely slow since Indias recently elected federal government released its union budget July 10, participants said. Market reaction to the budget weakened the Indian rupee vs. the dollar, making it harder for Indian mill buyers to import in a time of lower production.
"Indian markets are still very dull. ... Buying of imported scrap has slowed down considerably due to production cuts and costlier scrap offered, which leaves factories with no conversion margins and huge losses," one trader said.
"August will also be a dull month for Indian steel companies and buying should pick up from September onwards. Most buyers are awaiting some price corrections in the international market to the tune of $20 per tonne in order to start buying again," he said.
A surge in shipbreaking activity in India has also contributed to import price weakness, as domestic supply of scrap builds at weaker prices, another market participant said. "There is a huge surge of ships for breaking at Alang, which will keep the markets sluggish because Alang will generate enough scrap for north and west Indian markets."
Local prices in India have dropped more than import prices, Aman Rewri, head of scrap trade at Mumbai, India-based Mahindra Group, said.
"The reason for markets softening is the rains in India, and also the local prices falling more than the dollar price. This has made buyers buy locally. Going forward, I feel we will come to a point where shredders will not want to sell too much material at these levels and will create an artificial shortage. This would lead to a slight increase in prices," he said.