Secondary metal producers crumble under lockdown, shipping cos add to woes

Scrap imported at lower prices stuck at ports, finished goods lying at factories with no transport available; shipping firms make hay by charging huge sums for storage at ports

Secondary metal producers which cumulatively contribute to nearly half of India's ferrous and non-ferrous metal consumption are facing a double-whammy due to the spread of coronavirus (Covid -19) in both, India and overseas.

Since its outbreak in Wuhan city of China in December 2019, metal prices have declined by a massive 25-30 per cent. Since secondary metal producers had booked their raw material (metallic scrap) from overseas suppliers based on the prevailing price about three months ago, the subsequent decline in metal prices has made import of raw materials costlier. Additionally, factories are shutting due to non-availability of raw materials and labour, following suspended movement of public transport. Lifting of finished products by consumer industries at the factory premises has also come to a grinding halt as truckers and workmen have stopped plying amid threats to their safety from Covid-19.

On the other hand, port congestion has become a major worry for secondary metal and paper recyclers as shipping companies have started demanding detention charges for blocking their containers at the ports. Since shipping companies have declared themselves operational, they are asking material scrap importers (metal and paper) to clear their consignments or pay penalty for engaging containers beyond the agreed transportation period.

"Material Scrap is not an essential commodity. So truck operators are not lifting metal and paper scrap due to the lockdown across the country. Since truck fleets aren't available, lifting of cargo is impossible. Shipping companies see a business opportunity in the ongoing world pandemic and charge $52 a day for 20-foot containers and $104 for 40-foot container. This uncalled for charge will not only erode our working capital but also will root us out of business," said Sanjay Mehta, President, Material Recycling Association of India (MRAI).

A notification issued by the Department of Customs last week clarifies that bills of entry filed late for clearance of import consignments will not attract any late fee charges for the time being until further notice.

MRAI has also made various representations to the Ministry of Shipping and domestic and overseas shipping companies for waiver of detention and demurrage.

While the truck fleet operation was normal till the Prime Minister Narendra Modi announced one-day (14-hour) of public curfew on March 22. The PM again announced 21-day complete lockdown (equivalent to curfew) ending April 15, 2020.

"During this period of lockdown, we expect stockpile to build to the tune of around a million tonnes of imported metallic scrap at various ports. This will have adverse impact on the MSME units from metal recycling industry as their material value will become Zero if the shipping Companies charge them detention demurrage for 30 days or more.  Value of one tone iron scrap is around $250 and for one container of Iron Scrap it is around $5000 and the detention shipping lines are charging for 20 feet container is around $52 per day, which is around $1750 for 30days. Including other expenses, like ground rent, CFS charges, transportation etc the value of the goods in the container will become zero.

While criticising such hefty charges, Mr Mehta argued that Importers would not been able to clear their consignment due to shortage of trucks drivers and interstate districts boarders closed to road traffic, rail is also operating at minimal scale.

We, therefore, urge the government to grant us relief and waive off detention and demurrage and all other such charges application till 15th May, 2020 at the all ports and ICD in India," said Mehta.

In a letter addressed to the Union Finance Minister Nirmala Sitharaman, MRAI has urged waiver of penalty for late filing fee of bill of entry and interest on late payment of customs duty.

"We know the situation arising out of Covid-19. As of now, we have not received any direction from the management. We will update you in case the management takes any decisions in this regard," said Rashid Khan, a senior official with Safmrine India in its response.

Switzerland-based Maersk said in an address to its customers, "As a result of the coronavirus outbreak, we expect many ports to become congested in the coming weeks with a lack of reefer plugs and space yard capacity. If and where this situation materialises, MSC will not be in a position to discharge your containers at the designated port...Kindly note that in both cases, the Merchant will have to pay for any additional freight and costs generated."