Hitting the reset button

Features - International Markets

A nationwide lockdown in India caused disruptions felt beyond the nation’s borders, but India’s basic materials sector has been slowly ramping back up.

October 5, 2020

© Roop Dey / stock.adobe.com

India’s paper mills and metals production plants have become increasingly important consumers of secondary commodities from around the world throughout this decade. This overall positive momentum, however, came to a screeching halt when Indian Prime Minister Narendra Modi imposed a sudden lockdown on the nation’s citizens March 24 in an attempt to halt the spread of COVID-19, the disease caused by the novel coronavirus.

The lockdown lasted more than two months, until May 31, when people in most parts of India were allowed to leave their homes for work and other purposes. During the two-month stretch, seaports and inland container depots (ICDs) were considered essential and technically were open. However, in a nation where paperwork often still involves actual paper in the form of shipping and financial documents delivered from one point to another, the restrictions had an impact. Office workers, couriers, bankers and traders were seldom authorized to leave their homes to sign and deliver such documents. Thus, container cargo freight largely stopped moving.

Freeze-thaw cycle

The late March lockdown resulted in what the Material Recycling Association of India (MRAI) called “very testing times” for scrap importers and exporters. The disruption caused by the pandemic created “hurdles towards smooth execution of contracts, as services like shipping, transport, banking, courier companies, etc., get temporarily impaired or affected,” MRAI Secretary General Amar Singh said in mid-April.

The International Trade Committee of the Brussels-based Bureau of International Recycling (BIR) held an online meeting June 2, just as India was reopening. At that meeting, several participants noted the seized-up freight situation in India as having been a challenge, though they also said traders largely had acted in good faith to uphold contracts or agree to delays that were beyond the control of either party. “This is a different situation than in 2008. This is more of a movement or situational crisis,” said Greg Schnitzer, who served as vice president of ferrous sales of Portland, Oregon-based Schnitzer Steel Industries when this meeting took place. He is now vice president of global trade for Sims Metal Management Ltd., Rye, New York.

A trader based in another part of Asia says of disputes with Indian buyers, “We have had a few smaller buyers who have cried for help, price reductions and assistance with demurrage and detention, etc., but generally things have been totally different to 2008. I haven’t heard of many serious issues.”

Regarding the situation on the ground in India as of mid-July, Dhawal Shah of Mumbai-based nonferrous metals company Metco India, says, “Most containerized cargoes that were stuck at several ports and ICDs have been cleared.”

Also as of mid-July, Vikas Mahajan of Pathankot, India-based paper recycling firm Mahajan Recycle Resources, says, “Containers are moving in regular format and are reaching their destination in time for clearance.”

The latest logistics hassle is not affecting scrap shipments coming from places like Europe and North America. Rather, Mahajan says, some Indian importers “are hit by Chinese shipments stuck at ports since June 22,” when the Indian government began reconsidering its trading relationship with China after a border clash between soldiers of the two nations.

Mahajan credits shipping lines and others in the logistics chain for working hard to unclog the previous pileup. “Shipping lines like Maersk have worked around a three-pronged strategy to meet these challenges: moving cargo by rail wherever trucking is difficult, using digital solutions to circumvent the typical need for customs brokerage services and finding additional storage space,” he says.

India’s economy, like others hit by COVID-19 and subsequent restrictions on activity, is not producing and consuming at the same pace it was prepandemic. However, Shah and Mahajan say July brought with it some signs of a rebound.

“July has seen positive traction, as buyers have started booking new orders; there was a huge vacuum created in the last four months,” Shah says of the metals sector. He adds, “We shall slowly move into the festival period in India, which always sees an uptick in consumption. I am not suggesting that we shall be seeing pre-COVID demand, but a gradual recovery is certainly palpable,” he adds.

In the paper sector, Mahajan says, “Orders for overseas scrap are getting placed, but the size of both supply and demand has shrunk, owing to volatile market prices.” He says he also sees a lack of “sufficient demand for finished paper, leading to a downfall in paper pricing and a never before seen gap between demand and supply. The COVID lockdown has hit us economically more than medically.”

Motion sickness

In the second half of 2020, COVID-19 has remained part of the storyline in India. After the economy reopened, materials and people began moving in India again. Unfortunately, the movement of people brought with it the spread of the virus.

As of Sept. 18, the COVID-19 Dashboard maintained by Baltimore-based Johns Hopkins University showed India with about 5.2 million confirmed cases of the virus, behind only the United States. According to figures maintained by the university, more than 84,000 people have died from the virus in India as of Sept. 18.

The government in India largely has come down on the side of keeping most economic sectors operable despite the rising sickness toll.

By August, India-based buyers of ferrous and nonferrous scrap were much more active in the North American market, according to sources contacted by Recycling Today and media reports.

A scrap processor on the East Coast tells Recycling Today in mid-August that containerized ferrous scrap buyers from India (along with bulk cargo buyers from Turkey) were putting upward price pressure on ferrous scrap in that part of the country. 

Two weeks later, in late August, Fastmarkets AMM quoted a ferrous scrap buyer from India as saying, “Demand is good, and it should stay at these levels; it won’t go down [soon].”

Zain Nathani of the Mumbai-based Nathani Group of Cos., however, says COVID-19 continues to restrain the Indian economy from reaching the heights it had aspired to in 2020.

Nathani, who also is vice president of the BIR Ferrous Division, in a late July report prepared for the BIR writes that “domestic [steel] mills are facing cash flow issues. Ferrous scrap demand will be subdued for the rest of this year before greater normality is expected to return in the first or second quarter of 2021.”

COVID-19 in India has meant, Nathani writes, that “the latest forecast from the International Monetary Fund puts growth in India at under 2 percent for 2020-21. Such a rate is unacceptable for a large country with high aspirations, especially with the government hoping for a $5 trillion economy by 2025.”

Elsewhere in Asia, the virus is now less of a factor. However, governments in many of those countries have been prescribing “cures” to what they consider the illness of low-quality imported scrap materials. Not all of the cures are welcome in North America.

Recyclers in the second half of 2020 have been receiving more specific information from the government of Indonesia in terms of scrap import market participation and quality guidelines.

The Association of Southeast Asian Nations (ASEAN) region, which includes Indonesia as well as Malaysia, Thailand, Vietnam and the Philippines, has grown significantly as an importer of scrap materials from North America and Europe.

The picture in China is less clear. In early July, that nation’s government approved a fairly large list of more than 260 scrap paper and nonferrous scrap import quotas. At the same time, the Chinese central government has not yet finalized how a new “resources” classification will work for higher grades of copper and aluminum scrap, and it seems to be reinforcing its commitment to ban most scrap material imports beginning Jan. 1, 2021.

For recyclers and traders, the ripple effects of COVID-19 have produced considerable challenges. If the virus fades to the background in 2021, trade regulations likely will return to the front burner as a foremost issue for many recycling business owners and managers.

The author is the senior editor with the Recycling Today Media Group and can be contacted at btaylor@gie.net.