Import scrap prices have continued to show signs of weakening but the sharp rise in container shipping rates has tempered the fall in landed prices, while local secondary steel mills are still facing challenges of restocking with high-priced raw materials when rebar price gains over the past week have been slow, SteelOrbis has learned from trade and industry circles on Wednesday, August 11.
While the weakness in global scrap prices has been deepening, this has not been reflected in landed prices to India owing to rising freight costs and long lead delivery times reflected in the fact that the ex-US containerized shredded scrap price was down just $5/mt on average over the past week to $515-525/mt CFR Nhava Sheva port in the west.
“There is not only an acute shortage of availability of containers on the US West Coast-India west coast line, charges are up by at least 50-60 percent over the past two to three months. Our calculations show that ex-US freight for about 30,000 mt in 20-foot containers has gone up to around $98/mt compared to $75/mt a month ago,” a Gujarat-based scrap trader said.
“But for the rise in freight costs, the landed price of ex-US scrap should be notionally at least $20-23/mt lower than the current landed price. Major importers, that are secondary steel mills, are unwilling to cough up such a high freight rate component in prices,” he added.
Another section of the market including a secondary steel mill operator said that ultimately it is demand for finished steel products that will determine demand for the raw material. “Rebar demand and prices are both uncertain. Rebar prices are rising but too slowly, while raw material prices are surging. If rebar prices were to consolidate at higher levels at a faster pace, scrap imports even at higher freight rates would not have been a challenge like now,” the secondary mill operator said.
“The problem for secondary mills is their inability to pass on higher input costs onto their finished long products,” they added.
The only stray deal heard in the market over the past week was for a modest volume of ex-US shredded scrap purchased by a Raipur-based steel mill at a price of around $520-525/mt CFR Kandla port in the west.