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

Ferrous and non-ferrous scrap buyers are facing huge supply crunch in December as suppliers are spoilt for choice in a sellers’ market. A shortage of containers and tight vessel space triggered by a global trade imbalance has reduced scrap trades in the Asian markets.


Trade imbalance

The COVID-19 pandemic disrupted global trade which started with lockdowns —  including ports — that halted manufacturing and production and later led to slowdown of economy activities and consumption. Port handling capacities have suffered to the pandemic which is delaying clearance and return of empty containers and shipping lines are yet to recover their full capacity due to lower trade between countries. Post lockdowns, imports of most countries have reduced, while a speedy recovery of China’s economy has led to its exports soaring. This has caused a trade imbalance between Asia and the US; and Asia and Europe which in turn translates into higher freight cost due lower shipping vessel traffic.     


To deal with the mismatch between import and exports, shipping lines have also reduced free days at some ports, especially in the Indian subcontinent. A reduction in free days means containers could be recovered faster from importers, thereby easing the shortage of boxes. But on the other hand, delayed caused by customs or other issues could mean additional tariffs for importers, who are already pressured by high imported scrap prices.     



Fundamentally, ferrous scrap prices are in sync with iron ore prices, but in the second half of the year in addition to ore prices, freight rates are rising significantly, adding to the landing cost of scrap. 


Especially hit are containerised trades, scrap exporters are struggling with limited scrap inventories due to subdued collection in winter and are more inclined to selling the domestic market. Suppliers are also receiving additional bulk enquiries. 


Higher freight costs have lifted imported ferrous scrap prices to India by around $33/mt cfr in December from November.     


Ferrous scrap supplier in exporting countries like US are spoilt for choice and can either sell immediately to domestic steel producers, who are ramping up production post the slump induced by the pandemic, or hold back material for February or March deliveries when deals for HMS 1&2 (80:20) are expected to reach $440-450/mt cfr Turkey.



Aluminium scrap importers in India are struggling to secure scrap shipments from the US and Europe amid limited vessel and container availability. Imports of Tense and Taint/Tabor into India have dropped. Market participants expect auto alloy prices to surge in January due to a shortage of raw material. 


Though, the domestic auto demand has started losing steam, export orders for ADC 12 from China are robust. The Davis Indexes for Tense, Taint/Tabor and ADC 12 in Delhi are moving up more than Rs1,000/mt every week due to shortage of material in the domestic market. Strong LME Aluminium is also supporting price of aluminium scrap.    


Indian exporters

Fortunately, for many Indian steel and non-ferrous exporters, the domestic demand have improved significantly. Prices and realizations are stable enough to stick to domestic sales instead of focusing on export markets. Primary producers have significantly reduced exports of billets and other semi-finished products on better domestic opportunities.   


Indian exports dropped by 8.74pc to $23.52bn in November, while imports declined by 13.32pc to $33.39bn, according to the Ministry of Commerce and Industry.    


Shipping lines

French shipper CMA CGM and Maersk have declined booking requests from Asia amid overheated container market ahead of the New Year Holidays. Maersk claims the container shortage situation in India is easing and the company is repositioning empty containers from the Middle East and within the domestic market to high demand region, according to local media.   


On the other hand, German shipping company Hapag-Lloyd has announced new services for Europe – Middle East & Indian Subcontinent, which could improve connectivity through a vessel sharing pact with a shipping alliance comprising Hapag-Lloyd,  COSCO, CMA CGM and ONE. The weekly services will be facilitated with eight 8,500 TEU vessels.

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