Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

The COVID-19 outbreak in India has impacted exports of secondary copper, aluminium and brass semis and alloys. From late 2019, the biggest seaborne market for Indian producers has been China after it imposed restrictions on imports of scrap. The spread of the virus, first in China and now across the world, has dealt a blow to Indian manufacturers.


Sales of nonferrous semis and alloy in China have been on a decline since January. Indian exporters awaited clarity on demand due to the shutdown in China and the reclassifying exercise undertaken by the Chinese government of certain scrap grades as resources in late January.


Trade resumed late-February or early March, providing respite to Indian manufacturers, only to be hit by the global outbreak of the virus. India went into a complete lockdown from March 24, causing production and exports to cease completely despite demand from China picking up. Prices offered by Chinese buyers were low in this period, as LME base prices dropped, making it unviable for Indian alloy manufacturers to sell to China.


At present, a negative sentiment prevails among Indian alloy manufacturers as they have been facing several unfavourable factors in the past two months, including a 15pc or $280/mt drop in the official three-month LME aluminium contract and a 22pc or $1,300/mt drop in the LME copper futures contract. A 5pc depreciation of the India rupee from Rs72.5 against US$1 at the beginning of March to Rs76.5 at the end of the month has also impacted importers of non-ferrous scrap. Hopes of making profits through exports to China have also dampened.


Aluminium and copper scrap prices fell by 10-15pc since late January but transactions are unlikely to pick up for another 30 days at the minimum. Multiple scrap containers remain stuck at the ports and inland container depots, which the importers are unable to collect. Additionally, there have been no new scrap bookings in the past few days. Despite this, a likelihood of supply crunch of scrap, however, is thin when production resumes as manufacturers already have inventories stocked up amid low demand in the past few weeks.  


Meanwhile, China’s appetite for scrap and semi-finished products has increased after production resumed mid-March. With  Indian exports coming to a halt, China is exploring Turkish, Pakistani and Malaysian markets to fulfil its growing demand.


India began exporting aluminium alloy to China in July 2019 and shipped 6,355mt in Dec 2019. Production of these goods rose in late 2019, driven by export demand in China. With the Chinese government imposing quotas on imports of scrap, mills and alloy makers in China had turned to their Indian counterparts for purchases.  

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