India’s recycling market hits the reset button

The paper mills and metals production plants of India have become increasingly important consumers of secondary commodities from around the world throughout this decade. This overall positive momentum, however, came to a screeching halt March 24 when Indian Prime Minister Narendra Modi imposed a sudden lockdown on the nation’s citizens in an attempt to halt the spread of COVID-19, the disease associated with the novel coronavirus.

The lockdown lasted more than two months, until May 31 when people in most parts of India were allowed to leave their homes for work and other purposes. During this two-month stretch, seaports and inland container depots (ICDs) were considered essential and technically were open.

However, in a nation where paperwork still often involves actual paper in the form of shipping and financial documents delivered from one point to another, the restrictions had an impact. Office workers, couriers, bankers and traders most often were not authorized to leave their homes and sign and deliver such documents. Thus, container cargo freight largely stopped moving.

The situation resulted in what the Material Recycling Association of India (MRAI) called “very testing times” for importers and exporters of scrap materials. The disruption caused by the pandemic created “hurdles towards smooth execution of contracts, as services like shipping, transport, banking, courier companies, etc., get temporarily impaired or affected,” MRAI Secretary General Amar Singh said in a mid-April statement.

The International Trade Committee of the Brussels-based Bureau of International Recycling (BIR) held an online meeting June 2, just as India was reopening. At that meeting, several participants noted the seized up freight situation in India as having been a challenge, though they also said traders largely had acted in good faith to uphold contracts or agree to delays that were beyond the control of either party. “This is a different situation than in 2008. This is more of a movement or situational crisis,” said Greg Schnitzer of United States-based Schnitzer Steel Industries.

A trader based in another part of Asia says that in terms of disputes with Indian buyers, “We have had a few smaller buyers who have cried for help, price reductions and assistance with demurrage and detention, etc., but generally things have been totally different to 2008. I haven’t heard of many serious issues.”

Regarding the situation on the ground in India as of mid-July, Dhawal Shah of Mumbai-based nonferrous metals company METCO India says, “Most containerized cargoes that were stuck at several ports and ICDs have been cleared.”

Vikas Mahajan of Pathankot, India-based paper recycling firm Mahajan Recycle Resources says as of mid-July, “Containers are moving in regular format and are reaching their destination in time for clearance.”

The latest logistics hassle is not affecting scrap shipments coming from places like Europe and North America. Rather, says Mahajan, some Indian importers “are hit by Chinese shipments stuck at ports since June 22,” when the Indian government began reconsidering its trading relationship with China after a border clash between soldiers of the two nations.

Mahajan credits shipping lines and others in the logistics chain for working hard to unclog the previous pileup. “Shipping lines like Maersk have worked around a three-pronged strategy to meet these challenges: moving cargo by rail wherever trucking is difficult, using digital solutions to circumvent the typical need for customs brokerage services and finding additional storage space,” he says.

India’s economy, like others hit by COVID-19 and subsequent restrictions on activity, is not producing and consuming at the same pace it was pre-epidemic. However, Shah and Mahajan say July has brought with it some signs of a rebound.

“July has seen positive traction, as buyers have started booking new orders; there was a huge vacuum created in the last four months,” says Shah of the metals sector. He adds, “We shall slowly move into the festival period in India, which always sees an uptick in consumption. I am not suggesting that we shall be seeing pre-COVID demand, but a gradual recovery is certainly palpable.”

In the paper sector, Mahajan comments, “Orders for overseas scrap are getting placed, but the size of both supply and demand has shrunk, owing to volatile market prices.” He says he also sees a lack of “sufficient demand for finished paper, leading to a downfall in paper pricing and a never before seen gap between demand and supply. The COVID lockdown has hit us economically more than medically.”

Elsewhere in Asia, recyclers have been receiving more specific information from the government of Indonesia in terms of scrap import market participation and quality guidelines.

The Association of Southeast Asian Nations (ASEAN) region, which includes Indonesia as well as Malaysia, Thailand, Vietnam and the Philippines, has grown significantly as an importer of scrap materials from North America and Europe.

The picture in China is less clear. In early July that nation’s government approved a fairly large list of more than 260 scrap paper and nonferrous scrap import quotas. At the same time, its government has not yet finalized how a new “resources” classification will work for higher grades of copper and aluminum scrap, and it seems to be reinforcing its commitment to ban most scrap material imports beginning Jan. 1, 2021.