Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Indian steelmakers are focused on local scrap as the spread between domestic and imported ferrous scrap widened beyond Rs2,000/mt in July. 


The overall demand for ferrous scrap from steelmakers has declined since the first week of July. At the onset of monsoon, mid-size and small mills tried to clear their inventories and continued to buy only for immediate melt requirements. However, large scale producers are buying 25pc of ferrous scrap imports to maintain their inventory.


Scrap prices have gained strength despite weak demand on scarce availability in the domestic market. In the second week of July, prices rose amid tight supply. 



In Mumbai, domestic HMS 1&2 (80:20), Wednesday, traded at Rs33,700/mt ($452.7/mt) delivered mills. Offers for imported scrap is at $465-470/mt cfr Nhava Sheva, which translates to above $480-485/mt with handling and local transportation charges on a delivered mill basis. A price gulf of over $30-$33/mt between domestic and imported scrap has made imported scrap more expensive for secondary buyers in India. 


The ongoing monsoon has slowed down transportation, adding to the shortage of domestic scrap. Mills would prefer to book imports when the gap between imported and domestic scrap dips below Rs2,000/mt level, said market participants.


In the domestic steel market, there is a price gap of Rs800/mt between primary and secondary producers in Mumbai, which also reflects the price gap between domestic and imported scrap as imported scrap prices move in tandem with international iron ore prices. 


Steelmakers have pinned their hopes on improved finished steel demand in the next couple of weeks once the monsoon recedes, which could encourage them to place competitive bids for imported scrap in the coming days.

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