UK aluminium scrap sellers see India business plummet

UK aluminium scrap sellers have slashed the volumes they export into India following a sharp fall in the value of the rupee, with some reporting falls of up to 90% by volume.

“The amount we export into India is at its lowest in five years, and that is exclusively driven by the currency killing imports,” one scrap dealer said. “Our exports to India are now down 80-90% from a couple of years ago.”

The Indian rupee was trading at more than Rs105 to the pound sterling last week, from just above Rs80 in May.

According to UK export statistics, aluminium scrap exports to India fell in June from highs in May and April, reaching around the same levels as in March and February.

But sources expect significant falls for July and August.

“August and September will be the ones to watch,” a trader said. “It is a real struggle to ship stuff into India in September.”

Scrap that goes to India from the UK is not generally the same material that is sold in Europe, as standards concerning contamination and attachments are looser in India. So scrap metal buyers do not generally compete directly with European buyers for a lot of the scrap they buy.

The scrap dealer reported sales into other Asian markets as a substitute for volumes that would normally have gone into India, with deals done in China, Vietnam, Indonesia, and even Cambodia.

“Scrap that goes to India is often contaminated, painted or plastic-covered,” he said. “You can’t just sell it to Germany. You have to work a bit harder, but we’re always trying to find somewhere different.”

Nevertheless, exports into Europe have risen as those to India have fallen. Such has been the impact on prices in India from the currency moves, as well as the imposition of a 2.5% duty on scrap metal imports in India in May, that any scrap that can stay in European markets is doing so.

“At the moment, we’re exporting more into continental Europe than we’ve done in a decade,” the scrap dealer said. “There is strong demand from Italian, German and Polish consumers.”

Scrap prices have remained flat in Europe, but buyers have noticed that availability has improved.

“Scrap prices are stable and availability is actually better, because of lower export volumes,” a secondary aluminium ingot ` producer said.

Generally, Indian scrap importers prefer to buy material from closer regions, such as the Middle East. This changes the dynamic slightly with European sellers because any enquiries for European metal will usually already have gone through regional markets.

But exports to India from the Middle East have also fallen as a result of the weak rupee, though not to the same extent as in Europe.

“We’re doing more Middle Eastern material away from India now, just because of the rupee,” the trader said. “We’re doing less than 12 months ago, but we’re still doing good volumes.”

Not all UK scrap sellers have seen significant changes to their export volumes. Some already do not do any business into the Indian market.

“We don’t sell anything into India. We’ve haven’t sold anything into India for months and months,” a second scrap dealer said. “Because of the import duty, the rupee and the cost of shipping to India, it’s not a viable market.”

Should other dealers, looking at recent currency and policy moves, reach a similar conclusion, it will have lasting effects for aluminium scrap availability in markets across Asia and Europe.

“There is enough material around and we’ve had no problems buying scrap,” a second ingot producer said. “We’ll see what happens in the next few weeks.”