Excess supply in the Asian containerised ferrous scrap market caused by Indonesia's temporary freeze on imports has weighed on prices across the region, causing them to lag the speed of the Turkish price increase during the fourth quarter.
Typically, the containerised scrap price in the south Asia market follows the trend set by the Turkish scrap market. Taiwanese scrap prices correlate less closely but still often move in line with wider global trends.
But Asian containerised scrap prices have failed to match the extent to which Turkish scrap prices have increased since the end of September.
The Argus daily HMS 1/2 80:20 cfr Turkey price has increased by $77.90/t or 35.2pc from a three-year low on 30 September to $299.50/t.
The containerised shred cfr Nhava Sheva India assessment has increased by a significantly lower rate of 18pc to $292.50/t on 13 December from 27 September.
The Argus daily containerised shred cfr Taiwan price has risen by $40/t, or 17.7pc, since 30 September to $265/t on 13 December.
Lack of strong steel demand in local markets in India, Pakistan and Taiwan has contributed to the relatively weaker increase in imported scrap prices over the past two and a half months. But that lack of demand was further exacerbated by the exit from the market last month of Indonesia, which has become an increasingly significant importer over the past three years.
Indonesia placed a temporary moratorium on scrap imports on 22 November. The new policy aims to establish provisions on the import of hazardous and toxic materials as industrial raw materials. Scrap items under the regulation are classified into separate groups, with various scrap metal items like ferrous, aluminium and copper scrap categorized as waste and subject to comply with the new import regulations.
One trader said this has been a major factor that has weighed down on the containerised market. But it expects Indonesia to resume accepting shipments again soon, which could cause containerised prices to rise even if the Turkish scrap price begins to consolidate.
Ferrous scrap imports in Indonesia have increased year-on-year since 2016, rising to 1.84mn t in the first nine months of 2019 from 703,937 t in the same period in 2016. Indonesia was the 13th largest importer of ferrous scrap in the world in the first nine months of 2019 – up six places from 19th in 2016.
The UK, US and Australia are the three markets from which Indonesia imported the most scrap between January and September this year.
Volumes of ferrous scrap exported to Indonesia from the UK have increased significantly from 2016 to 2019. Scrap imports from the UK rose 281,085t in the first nine months of this year, up 102.8pc on the year, and 285.7pc from the same period in 2016.
In 2019 to date the UK accounted for 15.2pc of Indonesia's total ferrous scrap import market, while Australia accounted for 19.5pc and the US 12.5pc.
Imports from the US rose to 231,404t in the first nine months of this year, up 591.1pc from 33,482t in the first nine months of 2018.
Imports from Australia, which was the largest source of scrap imports for Indonesia in the past two years, rose to 360,104t in the first nine months of 2019, up 330.8pc from the same period in 2016.
By Corey Aunger
