Indian ferrous scrap import demand is expected to remain tepid in the near term, market participants said at the Material Recycling Association of India (MRAI) conference in Kolkata, India, on Jan. 24.
Both mill and recycler sources attributed the lackluster scrap market in India to weak finished steel sales by Indian mills, which were heard to be sitting on large stocks of unsold finished steel inventory, as well as expectations of tepid demand prior to the upcoming Indian elections in April.
“There is a supply overhang and demand is not able to keep up with the excess, this has created softness in the market,” said Sabyasachi Mishra, Business Head at JSW International. “There is also a lot of [finished steel] oversupply from markets, such as China, so Indian steelmakers aren’t able to compete strongly to export their finished steel in the international markets.”
India imported a record 10.47 million mt of ferrous scrap over January-November 2023, up from 6.84 million mt in January-November 2022, according to the latest Indian customs data.
Shredded material from bulk ferrous scrap cargoes booked late in 2023 was still heard to be available for purchase below $400/mt CFR in early 2024, well below current seller targets for containerized material around $420-$430/mt CFR Nhava Sheva, due to a lack of buyer interest.
As such, fresh import activity for containerized shredded scrap has been muted in the first weeks of January.
Platts assessed imported containerized shredded scrap at $407.50/mt CFR Nhava Sheva Jan. 19, unchanged for the third consecutive week and at a discount to the benchmark Platts Turkish bulk HMS 1/2 (80:20) import scrap assessment, which stood at $418.50/mt CFR Jan. 24, showed S&P Global Commodity Insights data.
Cheaper availability of alternate raw material inputs, such as domestic sponge iron (DRI), was also heard to have discouraged the import of more expensive ferrous scrap in crude steel production.
“India would be an opportunistic buyer because prices of DRI are much lower in the market , and compared to scrap prices moving much higher, buyers are unable to procure the cargo either in bulk or container, and the price ideas of the buyers are much lower so it will take time for the Indian market to again settle,” said Keyur Shah, CEO of Indian mill Mono Steel.
However, market participants were more optimistic about the Bangladesh import ferrous scrap market after the Bangladeshi general election Jan. 7.
“In Bangladesh, they’ve gone through their elections, I see infrastructure spending picking up, and I see letter of credit availability is becoming a little easier so I forecast an even better 2024 than last year,” said Zain Nathani, managing director at trading house Nathani Group.
“I think Q1-Q2 will be a little bit slow, but in the second half of the year we expect good momentum in the steel sector,” said Sanjoy Ghosh, Head of Supply Chain Management at Bangladeshi mill BSRM.
Scrap’s role in South Asian response to CBAM
Jyotiraditya Scindia, the Indian Minister of Civil Aviation and Steel, said in a video message to MRAI conference attendees that the government is in the process of compiling a final report regarding green steel and sustainability initiatives, as part of the country’s path to reach carbon neutrality by 2070.
Scindia reiterated his desire to see ferrous scrap usage in steel production rise to 50% by 2047. This is considered ambitious amid growing scrap export restrictions globally, from the EU’s proposed revision of the Waste Shipment Regulation from 2026 to the UAE’s imposition of a Dirham 400/mt ($109) duty on ferrous scrap exports from mid-January.
He also called for the continued formalization of the domestic Indian ferrous scrap sector in order to boost import substitution.
In the longer term, Indian and Bangladeshi mills largely expected ferrous scrap to play a key role in the transition to low carbon steel production worldwide, which would keep scrap demand elevated, especially as European markets would begin to demand “green” finished steel from foreign exporters, with Europe’s Carbon Border Adjustment Mechanism (CBAM) expected to come into effect in 2026.
CBAM is essentially a tariff on carbon emissions on any steel imports that come into the EU from 2026, and this is expected to be equivalent to the market price of the EU Emissions Trading Scheme at that moment. This would mean that any mt of steel from India entering the EU, without any carbon price accounted for, will have to bear that price.
“The Indian crude steel production currently emits 2.55 mt of CO2 per mt of crude steel produced, well above the global average of 1.9 mt of CO2 per mt of crude steel,” Scindia said. This higher carbon intensity could mean a loss of competitiveness for Indian exporters in the EU market.
“In terms of going towards green steel, one of the best ways is more and more use of scrap. Steel scrap is one of the most recyclable materials that doesn’t lose its properties. [Renewable] energy and scrap will play a major role in helping us to move to green steel and our task to get into CBAM norms,” said Nitin Gupta, director at alloy steel mill R. L Steels and Energy Ltd.
“In Bangladesh, we don’t have many blast furnace mills, only EAFs, or induction furnaces, and they are 90%-95% scrap-based, so I would say the steel sector is mostly green. They’re eager to use scrap as much as possible and reduce sponge iron consumption as much as possible,” BSRM’s Ghosh said. “The mills also have air pollution control systems in place and are planning how they can best face the upcoming global challenges of green steel.”
Spot buyers have been showing growing interest in carbon-accounted steel, with the demand for carbon-accounted steel expected to rise faster than supply, European market participants said.
Platts, part of S&P Global, launched a world first European daily carbon-accounted steel premium on May 2, 2023, which has averaged Eur112.46/mt since launch over the daily ex-works Ruhr hot-rolled coil (HRC) assessment.
The majority of EU carbon-accounted steel deals reported have settled for HRC with CO2 content of 1 mt and below per 1 mt of HRC under scopes 1-3.
