Scrap from Alang may bring down steel prices

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

27 Feb 2009

The increasing ship-breaking activity at the country’s largest ship-breaking yard, Alang, may cause a fall in steel prices, with hundreds of tonnes of scrap steel from the yard hitting the market. Scrap steel prices have already halved to Rs 16,500-17,000 a tonne from Rs 34,000 a tonne a year ago. The average daily dispatch of scrap steel from Alang has shot up in the recent past, from 1,600 tonnes to 6,500 tonnes.
Vishnu Gupta, president, Ship Recycling Industries Association (India) told ET: “The global slowdown, and a decline in business due to falling freight rates has led to idling of ships at Alang. The ship-breaking yard is estimated to recover nearly 10-12 lakh tonnes of scrap steel this year, which is almost twice that of last year.”
A Mumbai-based analyst added: “Yes, there is a correlation between steel prices and scrap steel prices. If there is less demand for steel in the infrastructure sector, the scrap steel demand would be less. Moreover, an oversupply of scrap steel from Alang will have a negative impact in the overall steel market.”
Industry trackers say scrap steel has a market share of 2-3% in the Indian steel industry. This could grow three-fold within a year if this situation continues.
The increase in ship-breaking activity is believed to be a fallout of the shrinking export-import business and falling freight rates. The Baltic Dry Bulk index, the shipping index barometer for dry bulk vessel activity globally, has gone down to 963 points from its record close of 11,793 in May last year.
“Currently, Alang has about 48 vessels lined up for ship-breaking. Another 25 are expected by the end of this month. For the whole of last year, there were only 136 vessels,” said AK Rathod, port officer, Alang. Recent data from the ministry of steel pegs India’s consumption of finished steel between April 2008 and January 2009 at 42.32 million tonnes.

Source: The India Economic Times