On August 27, SteelOrbis reported ex-India DRI offer at $360-370/mt CFR Bangladesh. The offers were higher than the alternative product source from imported scrap as global prices softened at the time.
Sources inform SteelOrbis that DRI offers have increased further through early September and have reached $385-395/mt CFR Bangladesh, up $25/mt over the past two weeks. The DRI import price at the top end of the range is approximately $30/mt higher than shredded scrap import offers, yet sources inform SteelOrbis that Bangladesh steel mills have recently concluded adequate DRI deals.
While DRI has approximately a $5/mt import duty advantage to scrap, a source added that it does not explain the large spread in the recent deals. He noted that mills are likely in need of the raw material and since much of the sponge iron (DRI) is imported via railroads and roadways, the immediate purchases provide them with flexibility. He also provided other potential explanations for deals despite the high price spread such as the fact that the BDT has gained valuation against the INR in general since the beginning of the year; more specifically, it has encountered a “5 percent strength against the INR in the past month as it started in early August at 1 BDT to INR of 0.81 to around 0.86 now.” He also noted that the BDT had encountered volatility against the dollar through most of August which probably resulted in limited dollar valued transactions. The currency volatility along with the trade politics and global scrap market uncertainty in his opinion likely did not allow for better scrap import volumes for September production.
Finally, the source commented on additional benefits from DRI such as decreased environmental impact and improved efficiencies, although the large price spread between scrap and DRI, in his estimate, will likely decrease as the market uncertainty narrows in the global scrap sector and Bangladesh mills return to the international market for larger buys of imported scrap.