India lockdown abruptly halts US container trade

A 21-day lockdown across India to stem coronavirus has abruptly halted containerized scrap trade due to severe labor shortages at ports and in customs, as well as the closure of inland container depots, local shipping lines and critical transportation infrastructure.

The impact of the stoppage to trade is likely to cause severe congestion at ports and along major shipping lines, as well as put immense downward pressure on prices due to the sudden drop-off in demand.

"Buyers don't want us to ship for the next 30 days and 60-70pc of our buyers want to back out on metal shipments that are already on the water," one US trader said. "The prices are going down and currency is already devalued."

The Indian rupee has depreciated by 10pc against the dollar over the last month alone, raising local currency costs for importers who buy the dollar-denominated scrap.

The nationwide lockdown began 24 March and will extend to 14 April, as the government takes aggressive measures to try to slow the spread of the coronavirus.

Similar to containment measures adopted by other countries throughout the world in recent weeks, the Indian government is only allowing essential businesses to continue to operate through this period.

There is no information available yet on what businesses will be exempt from the order, though India's steel ministry requested that no restrictions be imposed on integrated, induction or electric arc furnace (EAF)-based plants, and on the movement of people and raw materials via rail, road and waterways.

The Indian government has declared that its ports are essential services and as such will remain open and operational.

Traders told Argus that labor shortages have essentially paralyzed container activity.

"The ports are open for unloading and loading vessels, but any and all transportation from the port to the [container freight stations] or to the buyers yard is completely closed down," a second trader said. "Buyers' yards are also closed and workers are not allowed to come to work and everyone needs to stay at home. They are not able to even go to their banks to collect and pay for the documents/containers that have already reached the port."

Some of India's ports have declared force majeure in recent days.

Similarly, customs is in the process of clearing the inbound containers that have been offloaded from vessels but are staffed with skeleton crews and are for the time being only giving priority to essential pharmaceutical and medical supplies.

As a result, US ferrous and nonferrous scrap exporters throughout the US have been advised to hold back from shipping any new containers before mid-April, with some looking at options to re-route any containers on the water.

"Indian buyers are concerned the government is not going to let the ships in to unload containers, so they have all started cancelling orders. If they prepaid, they're trying to put shipment to a later date," another US trader said.

Traders noted that if buyers back away from sales they have a few options, which included trying to re-negotiate with the existing buyer or attempting to sell the container to a new party.

But other alternative destinations are increasingly hard to find as other countries in the region also adopt more aggressive containment measures, including Pakistan, Bangladesh, Malaysia, Indonesia and Malaysia.

India is a major destination for US container scrap exports, particularly for ferrous grades and aluminum shredded product zorba. The US averaged 84,000 t/month of ferrous scrap exports to India in 2019, as well as 22,500 t/month of aluminum scrap and 5,000 t/month of copper scrap, according to US Commerce Department data.

Weekly prices for shredded ferrous scrap cfr Nhava Sheva dropped by $20/t when last assessed by Argus on 20 March to $275-280/t, a four-month low.

Zorba prices have also dropped, falling by 4¢/lb on 20 March to 35-37¢/lb cif India, the lowest since 1 November 2019.

Meanwhile, large shippers are working to obtain waivers on demurrage and detention fees but for they have not heard whether their requests will be approved.

Sources said that the prominent Indian scrap metal recycling trade group has sent a formal letter to the government requesting that all fees be waived.

The issues have already caused a roughly one-week backlog of containers, as the stricter lockdown announced early this week was an extension of existing containment measures.

"It is not possible to put more material on the water at this time without knowing what is ultimately going to happen. Unfortunately, the situation is changing daily and we get new news everyday," the second US trader said.

Brad MacAulay

US scrap exports to India ’000t