H1 2024: India witnesses 8% decline in aluminium scrap imports amid rising geopolitical crisis

In the first half of the calendar year 2024 (H1CY24), India's aluminium scrap imports fell by 8 per cent compared to the H1CY'23. On M-o-M basis, the imports rose marginally by 4 per cent in June 2024. However, imports were up by 15 per cent in June 2024 compared to the same period last year, according to provisional data from BigMint.

The import volume dropped to 809,102 tonnes in H1CY'24 compared with 874,868 tonnes in H1CY'23. Meanwhile, India's aluminium scrap imports in June 2024 reached 167,641 tonnes, indicating a slight improvement compared to the previous month's 161,644 tonnes.

What drove scrap imports low in H1CY'24?

Image source- BIGMINT

The impact of Red Sea issue

The crisis in the Red Sea, which began in October 2023 and escalated through December 2023, has caused a shipping crisis that severely disrupted global trade and supply chains. This has particularly impacted routes through the Suez Canal, a critical artery handling approximately 30 per cent of global container trade. As a result, trade volumes were significantly reduced in early 2024.

Ships were forced to detour around Africa's Cape of Good Hope, increasing shipping and insurance costs. Furthermore, the delayed delivery of goods has persistently disrupted global supply chains. This disruption has narrowed profit margins and made exporting many low-profit items from their current operational locations impractical.

The shipment delays also negatively affected the import of aluminium scrap into India, as many of these scrap grades typically originate from the Middle East and the UK region. This region accounts for approximately 40-45 per cent of India's total scrap volumes.

Russian sanction impacts aluminium pricing

Image source- BIGMINT

In H1CY'24, LME aluminium average prices rose to $2,403 per tonne, marking a 2 per cent increase compared to H1CY'23 at $2,362 per tonne. Meanwhile, stocks rose 33 per cent in H1CY'24 to 6,95,372 tonnes from 5,20,905 tonnes in H1CY'23.

LME aluminium prices witnessed notable growth in April 2024, which continued until May, touching the peak of $2,610 per tonne, propelled by the sanctions on Russian metals. These sanctions are designed to cut off a significant revenue stream for Russia, which has been supporting its military activities in Ukraine through metal exports. This geopolitical development introduced uncertainty in global supply and demand dynamics, but by late June 2024, prices had eased to around $2,550 per tonne.

Meanwhile, stocks rose significantly, a reaction to the LME directive to exclude all Russian-produced aluminium, copper, and nickel from its system starting from 13 April. The bulk of the increase in aluminium inventory occurred at LME-registered warehouses in Port Klang, Malaysia. This uptick, reportedly influenced by substantial financial manoeuvres orchestrated by trading firms and warehouse operators, highlighted these entities' pivotal role in the industry.

Imported scrap price trends

Imported scrap has become more expensive, exacerbated by delays in arrivals and the rise in LME aluminium prices following sanctions on Russian products. This has compounded challenges for India's recyclers. The escalating costs of scrap and the declining values of refined metals have significantly diminished recyclers' profitability, prompting them to consider increasing the proportion of primary metal in their raw material mix.

The aluminium recycling industry is buoyed by the strong demand for aluminium alloys, driven by robust order books in the automotive and aviation sectors. This demand is contributing to price increases for major scrap grades used in aluminium alloy production, painting a promising picture for the industry's future.

According to BigMint's analysis, the average prices in H1CY'24 for key grades like UAE tense (8-9 per cent) and CFR Mundra stood at $1,820 per tonne, marking a roughly 4 per cent increase compared to H1CY'23. UK zorba averaged $2,064 per tonne, reflecting a roughly 7 per cent increase over the same period in 2023. Additionally, other grades, such as UAE taint tabor and extrusion, saw an approximate 4 per cent increase in the first half of the calendar year 2024 compared to last year.

Image source- BIGMINT

Grade-wise, region-wise imports

Discussing the top imported grades, taint tabor led the way with 178,282 tonnes, followed by Zorba at 169,617 tonnes, extrusion at 141,194 tonnes, tense at 110,368 tonnes, talk at 41,651 tonnes, and other grades at 167,989 tonnes in H1CY'24.

In H1CY'24, the northern region recorded the highest scrap imports, reaching 366,140 t, followed by the west with 292,658 tonnes, the south with 125,778 tonnes, and the east with 24,501 tonnes.

Country wise imports

Image source - BIGMINT

In H1CY'24, country-wise imports showed a slight improvement, with the US (361,297 t) being the largest supplier, followed by Saudi Arabia (192,088 t), the UK ( 79,949 t), the UAE (79,648 t), and the Netherlands (58,648 t). Imports from other countries totalled 69,577 t.

Outlook

There is anticipation that India's aluminium scrap imports may improve as scrap prices are expected to decrease slightly. However, uncertainties persist regarding LME aluminium prices due to ongoing volatility in global market sentiments.

Received under the content exchange agreement with SteelMint