MRAI 2020: Ferrous buying power emerging in Indian subcontinent

Increasing ferrous scrap import levels in India, Bangladesh and Pakistan could help the region establish a ferrous pricing benchmark specifically for the Indian subcontinent, several panelists at the 2020 Materials Recycling Association of India (MRAI) meeting speculated. That gathering of some 1,000 recyclers and traders was held near Delhi in February.

Sean Davidson of the Toronto-based Davis Index commented that new steelmaking capacity coming online in Bangladesh, combined with ambitious steel production targets in India, prompted him to begin tracking the region’s ferrous scrap buying power and techniques “four or five years ago.” The Davis Index launched in late February in part to offer new global and ferrous and nonferrous scrap pricing indexes.

Davis and fellow MRAI panelist Ronan Murphy of Argus Media, who is based in London, said there are still differences in how the Turkish and Indian subcontinent markets operate in terms of scale and purchasing habits. Murphy said flows from some regions in Europe to the Indian subcontinent had doubled in the past five years. However, “even if they double their [India-bound] tonnage again in the next five years, Turkey will still be a single larger market for those exporters.”

Working in the Indian region’s favor, said Davidson, is its buying diversity. “Turkey only buys bulk, they don’t take containers,” he commented. He also said mills on the Indian subcontinent can “buy containers from any coast of the United States, and from Europe,” and some of the larger mills also book bulk cargoes.

Turkey “largely” sticks to the East Coast of the United States, said Davidson. The Indian subcontinent “has that unique buying power to buy from any coast” and thus the potential “to replace Turkey as an influential benchmark.” First, though, “It will have to raise all bookings” to boost its volume for a new benchmark to emerge, he added.

Murphy said there are signs of unique Indian subcontinent pricing emerging, so that the “combined South Asian market does not have to follow Turkey to the same extent” on pricing in the future. He said there is still “strong price correlation to the Turkish market,” but in early 2020 buyers in the three subcontinent nations resisted the direct price link.

As 2020 started, said Murphy, Turkish mills rebuilt their inventories at the same time they couldn’t get access to Russian scrap because of new export protocols in Russia. Indian subcontinent buyers did not want to pay more for scrap because of Turkey’s circumstances, he remarked. “As time goes on, I think that’s what you’ll see.” Added Murphy, “Exporters in the United Kingdom, North America and Europe want to sell more” into the region, and thus may be willing to trade on a new, specific benchmark.

Another factor, cited by Davidson, is the size and scale of Turkish mills compared to smaller buyers in India. Some bulk sales to Turkey can be to a single mill buying tens of thousands of tons. “The kind of power in buying that [amount] can be really important,” he stated, adding that Indian consumers tend to be smaller.

Panelists also discussed the Indian government’s drive to replace imports with more domestically generated scrap. Bharatendu Gupta of Jindal Stainless Ltd. said proposed policies by the Ministry of Steel and other government agencies to boost recycling capacity in India are welcome, and his mills would enjoy the access to more “quality materials.”

Fellow panelist Himanshu Bindal of the Delhi-based Bindal Group concurred the support should be welcomed. He also expressed a preference for independent recycling firms emerging in India, rather than having the capacity in the hands of backward-integrating steelmakers and conglomerates.

Bindal also remarked that as of 2020, end-of-life vehicles (ELVs) and other feedstock is not yet flowing to an extent to keep a nationwide network of shredders supplied. That level of scrap supply “could be another 15 years” down the road, he commented.

The MRAI’s 7^th Annual International Indian Material Recycling Conference was Feb. 7-9, 2020, at the Hotel Hyatt Regency Gurgaon near Delhi.