Lack of demand for copper and aluminium scrap in India has forced sellers to explore South-east Asian markets. Demand in India is not likely to recover over the next few months.
Indian alloy manufacturers, especially brass billet makers, are stuck with brass scrap inventories bought in Jan-Feb at $3,700-3,800/mt when LME copper was around $6,200-6,300/mt and LME zinc was $2,400/mt. Brass billet prices have dropped from $4,150/mt cfr China port in Jan-Feb to $3,700-3,750/mt this week, a drop of 10pc.
The COVID-19 pandemic has forced brass billet makers in India to sell at a loss to improve cash flow and release containers held at ports. A similar situation prevails for copper ingot manufacturers who imported electric motors for $660-680/mt before the virus outbreak and are now finding it difficult to make profits on copper ingot sales to China.
In addition to subdued demand, sellers have been sceptical to sell to Indian buyers as most ask for discounts on scrap that was already sold, shipped but not unloaded due to the lockdown. India’s Zorba scrap buyers have requested for a $50-70/mt discount to cover the demurrage and detention charges levied by shipping lines for holding the material at the ports. This is also drying up the market, which is already in short supply as scrapyards across the globe were shut for weeks due to the virus outbreak.
Most sellers have started selling Zorba 95/2 to South-east Asian countries such as Indonesia, Malaysia, Vietnam and South Korea, countries that have also been producing ADC12 to export to China since the last few months.
Major Indian mills continue to buy scrap at market prices to maintain credibility. They are operating at 20-30pc capacity due to social distancing norms. Mills are finding it difficult to have their containers unloaded in time. Market sentiment among Indian non-ferrous manufacturers is low as there are no signs of downstream demand recovery for the next few months.