The United Arab Emirates’ Ministry of Economy, has released a notification to ban ferrous scrap exports for four months effective Friday, May 15.
In a release dated May 10, the ministry informed such restrictions on scrap exports will ensure availability of raw material for domestic steelmakers to carry out undeterred operations amid uncertainties caused by COVID-19 pandemic.
All major scrap grades falling under HS codes 720410, 720429, 720430, 720441, 720449, 720450 for ferrous scrap and 720421 for stainless scrap are banned for exports.
UAE remains the largest ferrous scrap exporter for India and supplies over 1mn mt per annum. Emirates exported 1.15mn mt ferrous scrap in 2019 to India accounting for 16.35pc of the total imports. The country is also the second-largest exporter of ferrous scrap for Pakistan after the UK. In 2019, UAE exported 656,000mt of scrap to Pakistan accounting for 18pc of the total imports.
Trades for UAE-origin HMS 1&2 (80:20) were at $240-245/mt cfr Qasim in the last week. Pakistan and Indian mills bid for HMS 1&2 (80:20) at $230-235/mt cfr Nhava Sheva and Qasim. But UAE suppliers expected higher prices in the coming days.
Ferrous scrap price in South Asia can rise due to this development. Mills in India and Pakistan are likely to opt for scrap from other exporting countries. Imports of HMS from the UK, Europe, Africa and Australia could pick up decreasing seaborne trades with major importers like Turkey and South Korea. This, at a time when the global ferrous supply already remains short.
In India, scrap prices remain under pressure due to sluggish finished steel demand and resulting production cuts. An importer believes with the ban in place, ferrous scrap prices will end their fall.
Some suppliers though feel the decision is unlikely to change trade dynamics, given a ban on exports under HS code 7204 (ferrous scrap) has been in existence for a while. To circumvent it, the material is reclassified for shipping.
A welcome move for mills in Emirates
According to a Davis Index source at BMR, annual ferrous scrap imports and exports from the UAE amount to 3mn mt. The move could help three major domestic steelmakers in the UAE – Emirates Steel, Arabian Gulf Industries and Shattaf Steel which are large ferrous scrap consumers. These mills had increased usage of direct-reduced iron (DRI) in recent years. After the ban, ferrous scrap usage is expected to pick up.
Emirates Steel produced 3.1mn mt of finished steel in 2018, of which 2mn mt was rebar. Induction furnaces like Arabian Gulf Steel in Abu Dhabi and Shattaf Steel in Sharjah annually produce 400,000mt and 100,000mt of billets, respectively.