Scrap shippers seek fee relief amid India lockdown

Containerized scrap metal exporters are calling on the Indian government and shipping lines for waivers to detention and demurrage fees through India's 21-day lockdown, amid concerns that the costs will quickly exceed the value of certain shipments of low-grade nonferrous and ferrous scrap.

Strict containment measures adopted by the government earlier this week to contain the outbreak of the coronavirus have caused severe labor shortages at ports and in customs and have also led to the closure of inland container depots, local shipping lines and critical transportation infrastructure.

Scrap metal shippers have aggressively worked to head off the possibility of a spike in port and inland daily storage fees over this period, which they fear could push distressed buyers to walk away from material and leave them with substantial financial losses.

"There is a tipping point where this will happen, and I've seen this many times before where buyers just walk away," one US supplier said. "Think about a drowning man, he's going to do whatever he can to stay afloat."

Exacerbating the situation is a global container shortage, according to traders who said shipping lines base the daily fees off a function of container supply versus demand.

Demurrage fees on the other hand are charged by ports and inland container depots (ICDs) for the space used for storing the container.

These daily fees are ultimately the responsibility of the holder of the bill of lading, which for scrap metal shipments to India are usually suppliers or traders as the majority of shipments are traded on a cif and cfr basis.

Shipping lines typically allot a 14-day grace period before the daily detention fees set in once a container arrives at its final destination, whether a port or an inland container depot. This gives the parties enough time to pull, transport, unload and clean the containers before returning to the shipping line or freight forwarder.

The 21-day shutdown essentially makes it impossible for anyone to meet this time period and as such market participants and trade groups are calling on both the government and shipping lines to issue waivers.

"Right now, six of my buyers have backed out of containers that are currently on the water," a second US supplier said. "This is going to be a disaster. If they don't take the bill of lading we are responsible. The numbers are getting bigger every day and we're trying to do whatever we can do to make them take it, but the buyers are not even responding anymore."

Other suppliers and traders said they are also working with buyers at the moment and have not suffered any cancellations yet.

"All [consumers] have confirmed they will accept shipments, only requested that we delay loading to cope with current closures and port congestion to ease with material flow in factories from early June," a third US supplier said.

Market participants and industry trade groups are actively urging the Indian government to get involved in order to prevent the potential for widespread bankruptcies in the sector.

"Ultimately the Indian government has to do something or its going to wreak havoc on the industry and bankrupt companies," a fourth US supplier said. "Right now, it's going to affect a lot of smaller trading houses."

The India-based trade group Material Recycling Association of India (MRAI) has called upon various government agencies, ports and inland container deports throughout India to waive penalties from late filings of import shipping documents, as well as any interest on late payments of customs duties.

One US-based freight forwarder told Argus that they have not yet seen any shipping lines issue a blanket waiver for the fees.

Shipping line Maersk has granted a temporary exemption of not charging detention fees for any imported container into India between 25 March to 7 April, providing a cushion to extend the 14-day grace period.

But market participants are skeptical that the situation will be quickly resolved with congestion at ports and along major shipping a looming issue, as well as the potential fallout of cancellations.

"We have great relationships with our buyers, but we might still get stuck with a huge amount of material if they walk away or go out of business," a fifth US supplier said. "This is going to cost us a lot."

By Brad MacAulay