Higher credit costs, lower direct-reduced iron (DRI) prices and increased DRI availability will limit Indian appetite for bulk ferrous scrap, speakers said at an international business summit in Thailand.
India bought about 55 bulk ferrous scrap cargoes in the past 9-12 months, but this is unlikely to be repeated, Material Recycling Association of India's (MRAI) president Sanjay Mehta said at the MRAI summit in Bangkok on 22 August. India bought 10 bulk ferrous scrap cargoes from the UK and 38 cargoes from the US between July 2022 and July 2023, according to Argus' scrap export shipment trackers.
The rise in interest rates over the past six months led to higher credit costs for scrap imports, which has made buying bulk cargoes more costly compared to containerised shipments. Credit cost for imported cargoes in India is currently around 6-7pc, Mehta said.
"Assuming you can buy containerised and bulk shipments at the same price, the difference in credit cost could be as much as $500,000-1,000,000," a trader told Argus. "This makes buying bulk [cargoes] a very unattractive option."
Lower supply and higher prices for DRI or sponge iron in 2022, driven by a thermal coal shortage in major DRI-producing states in India, helped to drive appetite for imported ferrous scrap in the second half of last year. But DRI supply has largely recovered this year and resumed being a main alternative to imported scrap.
India will continue to require large volumes of steelmaking raw material as it continues boosting steel production capacity in the coming years. Steelmakers will need a basket of resources, including sponge iron and scrap, instead of just focusing on scrap in order to minimise raw material risk, Mono Steel India's director Keyur Shah said.
"It is quite simple — Indian buyers will look at whether scrap or sponge iron is cheaper and decide what to buy," another trader said. "And recently, imported scrap prices, particularly bulk scrap prices, are not that competitive once you factor in the exchange rate, credit cost and lead time."
