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| Scrap metal to look up on core sector demand |
| Newswire18 / Mumbai Jun 14, 2009, 00:26 IST |
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Ferrous scrap consumption in the country, which has been showing signs of revival since the start of the current financial year, is expected to get back on track over the next nine months, driven by demand for iron scrap from the infrastructure sector, industry officials said.
“With demand from the steel industry escalating, iron scrap consumption may see further revival to 60-65 per cent (of the 2007-08 levels) from the current 40 per cent,” Hemant Parekh, director of Bombay Metal Exchange, and an importer of non-ferrous metals, said.
At the end of the last financial year, demand for overall scrap metal had weakened to 30 per cent of the previous year’s average.
The local scrap market is divided into ferrous (60 per cent) and non-ferrous scrap (40 per cent). Ferrous scrap includes iron scrap, various grades of steel scrap and alloys, while non-ferrous comprises zinc, copper, lead, tin, and aluminium.
Most infrastructure projects, which were in doldrums last year due to paucity of funds amid the global economic crisis have picked up momentum and were likely to get back on the fast track, scrap traders said.
“The industry is hopeful the government will provide required assistance, and in turn, help infrastructure projects come on board,” said Ashok Bafna, director of Bombay Metal Exchange, and a trader in finished products made from scrap metals.
Non-ferrous scrap
Among non-ferrous metals, copper is seen driving demand in the next 9-10 months because of a sharper recovery in the infrastructure sector, traders said.
“Further rise in demand for copper scrap is expected to be in line with iron scrap, which is expected to revive to 60-65 per cent in the coming months,” Parekh said.
Currently, local demand for copper scrap has recovered by 40 per cent. The country’s average copper scrap consumption was 84,000 tonnes in 2007-08.
“The wire drawing industry is expected to boost demand for copper scrap in the local market,” Parekh said.
The copper wire drawing industry includes tubes and sheets, among others, and finds significant application in the infrastructural sector.
Steady rise in auto sales in the country over the last two months has made the non-ferrous scrap market optimistic of good demand in the coming months.
“We expect auto sales to remain high in the coming months and this will surely lead to increased demand for some non-ferrous scrap metals such as aluminium and lead. Also, with new cars launches in the market, demand for metals will rise,” said Vinod Agarwal, supplier of aluminium products to auto maker Maruti Suzuki’s unit at Gurgaon.
In May, car sales in the country rose for the second straight month to 113,490 units, up 2.5 per cent from the same period a year ago, reports said.
Lead scrap is mostly used in car batteries, while aluminium is used to make car engines and cylinders, among other automotive parts.
Before the slump set in, the country’s non-ferrous scrap annual consumption was around 1.2 million tonnes.
Overview
Also, demand for scrap metal was expected to rise as the prices on London Metal Exchange (LME) have increased considerably over the last few months, traders said.
“As most metals prices on LME have risen, the market is turning to scrap as it works out to be cheaper. Overall scrap demand, which was only 30-35 per cent (of the previous year’s demand) as of March-end, has surged to nearly 70 per cent since April and is expected to further rise in the coming months,” said Rasik Kothari, president of the Bombay Non-Ferrous Metals Association.
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