Indian local scrap market has got into a tailspin with prices crashing in reaction to secondary steel sector drastically reducing capacity utilizations due to falling finished steel prices, overall de-growth in manufacturing sector and coupled with sharp rise in scrap availability across key stockyards, traders said on Wednesday, August 14.
According to market sources, prices of HMS I/II 80:20 scrap crashed INR 1,500/mt during the past week coming to INR 24,000/mt ($337/mt) ex-stockyard at Mandi Govindgarh in northern India while prices plunged INR 1,000/mt to INR 23,200/mt ($326/mt) ex-stockyard, at Alang in western India.
Market sources said that the fall in scrap prices is in direct correlation with the fall in prices of rebar and wire rod that the main produce of secondary steel mills, which are in far weaker position to absorb lower margins from finished steel sales and hence are lowering their capacity utilization rates and raw material off-takes.
Giving an indication of fall in capacity utilization, a steel sector analyst with a Mumbai financial advisory firm has said that while the secondary steel sector accounted for around 60 percent of total Indian domestic steel making capacity, the secondary steel mills’ contribution to total domestic steel production decreased to 40 percent over the past three months.
Source pointed out that since bulk of the secondary steel sector production was through the electric arc furnace route, these steel mills had far lower capacity to absorb soft finished steel prices as their primary cost of energy (thermal electricity) continue to remain high and any market downturn left them with only alternative to progressively shut down furnaces.
The fall in domestic scrap prices is also in reaction to over-supply of scrap in global markets, with landed price of imported scrap fell below the $300/mt mark during the past week losing $10/mt and coming to $290/mt CFR Nhava Seva port in western India. However according to market sources no import bookings have been reported during the past week, largely owing to the sharp weakening of the Indian rupee.
$1 = INR 71.10