The ferrous scrap market in the Indian subcontinent, covering India, Pakistan, and Bangladesh, is experiencing a significant shakeup due to issues plaguing a vital trade route through the Red Sea, Kallanish notes.

Traditionally, the key sources of scrap imports for the region are Europe, the UK and US. However, trade dynamics appear to have been shifting in the last two months, especially for the Bangladesh market.

Scrap buyers in Bangladesh are moving their focus to alternative sources like Australia and Brazil.

The Red Sea shipping disruption due to Houthi rebel attacks has caused a sharp rise in freight rates, making offers from traditional sources less attractive for Bangladeshi buyers. Moreover, the alternative sources offer benefits such as smoother letter of credit processes and shorter lead times.

The latest imported offers for Australia- and Brazil-origin HMS 1&2 80:20 scrap were reported at $410-412/tonne, while shredded scrap is priced at $428-430/t and PNS at around $434-436/t, all cfr Bangladesh (see Kallanish passim).

While Indian buyers are still receiving offers from Europe and the UK, they are grappling with extended lead times, now at 60 days compared to the previous 30-45 days. This delay significantly impacts steel production schedules and increases uncertainty.

Adding to the woes, container freight rates have skyrocketed. From $900-1,000 tonne per box in November 2023, they have jumped to $1,650-1,700/t by mid February 2024.

Market participants believe that notwithstanding the currently low Indian demand for ferrous scrap, the significant rise in freight costs will squeeze producers’ margins and prompt buyers to seek more cost-effective alternatives.

Conversely, in Pakistan, purchasing ferrous scrap from alternatives like Australia is financially unviable due to higher freight costs.

However, demand in Pakistan remains slightly stronger compared to the Indian market, allowing EU/UK sellers to secure competitive rates there against the backdrop of the challenges posed by the Red Sea issues.