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

Demolition activities in Alang shipbreaking yards are expected to gain pace by mid-August when around 75pc of workers are likely to return. For a short window immediately after, an excess inventory in the Gujarat market is likely to disturb the current macros of the economy, states Rajveer Singh Sethi, Marketing Manager at Priya Blue Industries, the largest yard in Alang. 


In an exclusive conversation with Davis Index, Sethi shared the present and the near term market fundamentals in India’s ship recycling sector. He states a tonnage of over 160,500mt has already been pre-booked and is expected to arrive at Alang in the coming days. With a glut in the market, especially since mills may be away from major buying till finished steel shows signs of recovery, the Indian domestic market could lose its price potential, mimicking the scenario in the Bangladesh markets in June.


Considering the quantum of tonnages beached at Alang, and those to be added for its green recycling in facilities, prices of ship plates may move downward by Rs3-4/kg (Rs3,000-4,000/mt),” shares Sethi. 


He further added that at present, prices in Alang are quite healthy with the 10-12 mm thick ship plate priced at Rs27,300/mt ex-yard. A shortage of workforce, 35pc of the actual capacity have given prices a lift for the time being. 


But the continuously rising tally of COVID-19 cases has brought with it a fear of stringent social distancing restrictions in parts of the country, especially since Pune, one of the auto hubs of the country going into an ‘essential services only’ lockdown. 


“Recyclers will be anytime forced to stop their supply to mills located in areas where sudden lockdowns are getting imposed, which could impact businesses,” states Sethi, adding, “Businesses which opted for the moratorium scheme during COVID-19 are functioning well today, but we do not know when they might declare bankruptcy.”


According to Sethi, the current consumer market is supply-side driven. Hence all recycling yards and rolling mills have adopted the ‘just-in-time’ technique of production. The current firmness in prices of ship plates is supported by demand from mills in the surrounding areas, which are opting for domestic raw materials that can be procured easily.


Pre and post-COVID-19

Around 59 vessels were beached at yards in Alang, India before COVID-19 in the Q1 of FY2020 (Jan-March), informs Sethi. In the quarter, the total tonnages beached at recycling yards of Alang is was over 467,750mt. 


After the lockdown announcement, over 70pc of the workforce returned to their hometowns onboard special trains arranged by the government from the Bhavnagar station. Recycling operations slowly started to resume after May 1, 2020. “Assuming the yield of approximately 60pc of 467,750mt, those inventories would have been exhausted by now,” shares Sethi.

He further added during the virus outbreak, recyclers started grabbing large tonnages at discounted rates with 43 vessels beaching at Alang after the yards reopened. “The inventory in hand since the lockdown has reached pre-pandemic levels or over 443,600mt at yards. At Alang, it requires around a month to finish all formalities after the vessel arrives to receive a permission letter from the authorities to commence its recycling,” informed Sethi. 

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