INTERVIEW: Asia ferrous scrap still growth market: Jaguar Steel and Coal director

Singapore — The Asian ferrous scrap market still offers opportunities for growth in 2020, even with a tougher trading environment, according to Akshay Kharbanda, director of regional ferrous scrap trader Jaguar Steel and Coal.

The company achieved 2019 sales of 805,000 mt of ferrous scrap, 10% higher for the year. Pakistan took 40% of its total scrap volume within the year, while India took 17%. Both showed gains for the year. Sales to Bangladesh took 19% of the pie, but shrank 38% from 2018. The drop was attributed to stiffer competition as the growing market of Bangladesh started to gain more attention from other regional traders, Akshay said.

"Buying patterns from Bangladesh have changed from their usual containerized purchases to more bulk ones," he said. "So to stay relevant we have to ensure we have diversity."

Indonesia changes game for traders

The recent changes in Indonesia's scrap import regulations that took effect November 23 are still a challenge, he said. "With all of these new rules, everyone has suffered. Mills, suppliers, and traders alike. The government has to consider an effective alternative, or even to reverse this rule."

Indonesia used to be a very good market "especially for busheling traders like ourselves," Akshay said. There are still opportunities with Indonesia's numerous induction furnaces.

JSC was previously doing monthly sales volumes ranging 10,000- 12,000 mt into Indonesia, coming from various origins across Europe and the Americas.

However since November, the company's sales plummeted to about 3,000 mt/month.

"We have to be careful with laws like this, as it may lead to huge losses," Akshay said, recalling Vietnam's tightening scrap import controls in 2018-2019.

Starting in June 2018, Vietnam intensified its customs import procedures and checks for any incoming seaborne scrap, in a bid to prevent any rerouted "trash" from China's movement against imported rubbish to enter Vietnam, Platts reported previously. This inadvertently led to long delays of scrap shipments at Vietnam's ports, chalking up huge losses for traders, Akshay said.

As opportunities in Indonesia faded, JSC found itself having to shelve plans to open a Jakarta branch office to boost monthly sales to 20,000 mt.

Instead, JSC is turning toward business ventures at scrap origins instead, particularly in the US and UK, to circumvent the "blockage" to sell to Indonesia.

"This will allow us to get back into the game," he said. "It is planned for our 2020 financial year'' starting in April.

In 2019, sales volume to Indonesia took a hit, and fell 15% to 110,000 mt.

Growing blast furnaces presence changes flows

A growing list of blast furnaces in Asia is changing the dynamics of scrap trades inside the region, he said.

"Yes, this is an issue which electric arc and induction furnace steelmakers in Southeast Asia face now," Akshay noted, "but this brings different opportunities for the market too."

"Regional flow of busheling scrap has been changed," he said, "Malaysia used to be a big exporter of such scrap, to Chittagong, India, and Indonesia. But much lesser now, because of the startup of a new blast furnace there."

JSC saw its 2019 sales volume of busheling fall 20% to 120,000 mt.

He added that additional pressures on regional scrap flows came from billet produced by these blast furnaces.

"These billets are being dump within the region. Like into Indonesia for example. Which then affects their scrap requirements," he said. However, he said new opportunities also developed, leading to more demand for thicker scrap material, such as PNS and HS grades, in Southeast Asia, which helps to fill the gap from lower Japanese blast furnace demand within Japan too.

Diversifying focus to keep relevant

In lieu of such disruptive changes to the Asian market, Akshay reiterated that staying diverse is key to business.

Since the previous hit due to Vietnam's stricter import controls, JSC found itself having to switch its focus to other markets such as Taiwan.

"With lost opportunities in Vietnam, the company has however found new doors to explore," he said.

JSC's 2019 volumes to Taiwan doubled to 80,000 mt as the company started to emphasize client diversity across the region.

"Our goal for next financial year is to hit 20,000 mt a month to Taiwan," he said. "These are opportunities, and being diverse while keeping old channels continuously open is important."

He noted others were adopting this practise: for instance Japanese traders have been placing greater emphasis onto the regional export market, instead of previously just focusing on domestic sales.

But as seaborne trade competition heats up, and amid the "tricky" situations that Asia may present, Akshay is staying hopeful and plans to bolster the company's other businesses in steel, semi-finished, and non-ferrous scrap, with targets to push sales to 1 million mt/year for the 2020 financial year, he said.