Ferrous scrap trade between India and the UAE is likely to come to a halt as Indian port officials investigate scrap cargoes arriving from the UAE despite a ban.
The UAE had announced a temporary ban on exports of all ferrous scrap products in May 2020 and has since extended it periodically. The current extension of the ban will last until 19 June, after which market participants expect it to be drawn out further.
Despite the ban the UAE remained India's top source for ferrous scrap imports in 2022 with volumes totalling 1.27mn t, and held the second spot during January to March of this year at 360,138t, Indian customs data show.
But the continuous flow of scrap containers from the UAE has recently raised security concerns for Indian port officials prompting them to withhold containers coming from the country. Over 1,000 scrap containers are held in Nhava Sheva port, Mumbai, Kandla and Mundra ports in Gujarat and some in Inland Container Depots (ICDs), according to traders.
The Nhava Sheva port has released a standard operating procedure (SOP) for examination and verification of these containers under their risk management system earlier this month, with emphasis on more thorough inspection if goods originate from Pakistan, Yemen or Iran.
"There is misdeclaration from the UAE suppliers, so our customs are suspicious that smuggled goods are coming from Yemen, Iran and Pakistan," a trader said, adding that these containers will get cleared but future scrap coming from the UAE will face hurdles.
Even before the export ban was introduced, the UAE government had imposed a $68/t duty on ferrous scrap exports. Suppliers were prompted to misdeclare the commodity by not using the word scrap in export documents or using a different HS code to evade the export duty, the trader added.
But the scrutiny by Indian port officials is likely to discourage Indian importers from sourcing scrap from the UAE going forward.
"These containers have been stuck for almost a month and any further shipments from Dubai are definitely not happening. As long as the ban is in place, nobody will take the risk any more," Ispat Exports director of international trade Raj Shah said.
The government could make a one-time exception for scrap importers, but going forward there will be a complete ban, Shah said, adding that the export of UEA scrap to India is in violation of UAE and Indian customs regulations.
"In Mundra, they are releasing the containers on 10pc bank guarantee, but few buyers have managed to achieve that and taken delivery of containers," Keyur Shah of Mono Steel India said, adding that in Nhava Seva customs officials will examine the cargo before its release.
"Once these containers are cleared, then it would be [determined on] a case-to-case basis for suppliers and buyers on how they agree to future scrap trade between the countries," Shah said.
