Increasing scrap imports to India – a new hope for Handies

Given the expected increase steel demand, the Indian government has been under pressure to make ferrous scrap more affordable. We expect the government to do away with the current import duty of 2.5% on ferrous scrap amid growing pressure from domestic steel producers.

The Indian government’s export regulator, MSTC, forecasts a growing shortfall between local supplies of ferrous scrap and domestic requirements. From the current level of 5.5 million tonnes per year, it is forecast to rise to 12 million tonnes per annum by 2023. To meet the shortfall, India will continue to rely on imports of ferrous scrap from locations such as Europe and the US.

Impact on shipping

Rising imports should benefit the Handysize segment because of the long-haul nature of the trades. For example, the sailing distance between New Orleans and Vizag is 12,400 nautical miles, while it is 7,500 nautical miles between the UK and Vizag. A one-way trip from the US to India takes 42 days, and from the UK to India, it is 26 days. An increase of 6.5 million tonnes of cargo movement between the US/Europe and India will generate an annual demand of 200 plus Handysize ships by 2023, good news indeed for the sector.

A more detailed analysis on the potential impact of rising seaborne trade in ferrous scrap on the Handysize market will be contained in the January 2018 edition of Drewry’s Dry Bulk Forecaster.