Large volume of 1.2 lakh tonnes excite Chhattisgarh buyers

The Steel Authority of India (SAIL), through its flagship subsidiary, the Bhilai Steel Plant (BSP), is auctioning a very large volume of around 120,000 tonnes of commercial rail scrap. This is for the first time in a long while that SAIL is offering such a large quantity of this type of material through an auction, Steel360 learned from its channels.
While almost 100,000 tonnes have already been auctioned so far in this quarter, the balance 20,000 tonnes are slated to be auctioned in March itself, it is learnt. The auctions actually began from December 30, 2020, although the bulk is being sold in the current quarter.


Chhattisgarh-based Mills Show Interest
he Steel Authority of India (SAIL), through its flagship subsidiary, the Bhilai Steel Plant (BSP), is auctioning a very large volume of around 120,000 tonnes of commercial rail scrap. This is for the first time in a long while that SAIL is offering such a large quantity of this type of material through an auction, Steel360 learned from its channels.
While almost 100,000 tonnes have already been auctioned so far in this quarter, the balance 20,000 tonnes are slated to be auctioned in March itself, it is learnt. The auctions actually began from December 30, 2020, although the bulk is being sold in the current quarter.

Interestingly, all the participants at these online auctions have been secondary mills from Raipur and nearby region, who use induction furnaces for producing their semis and finished products.
Importantly, the scrap is being bought only for melting purposes, it is learnt. The reason is that Raipur, which is a hub of secondary mills in India, is located far from scrap generating centres, which are mainly the larger cities or regions close to an auto hub, say, like Gurgaon, Ludhiana or Pune, and the local mills are forced to use sponge iron as their main feed.
Hence, there were ready takers for this large volume injection in the market.

Superior Quality

BSP is the first and main producer and supplier of rails to the national carrier, Indian Railways. However, it seems, there was a pile-up of inventory of commercial rail scrap over the last 3-4 years, for which approval had not been forthcoming all this while. Now that the green signal has been received from the headquarters, BSP is going ahead with the auctions.
The material which is being auctioned is primarily “industrial use” or “commercial rail” scrap. Also, it is of superior quality compared to that available in the local market because it is made as per government specifications for Indian Railways, which requires high precision specifications or else the rails can easily get rejected at the chemical composition testing stage.

Sponge Iron Prices Under Pressure

As a spin-off of this SAIL auction, sponge iron prices have consistently remained on the lower side compared to the bids and melting (end-cutting) prices reigning in the region since the tail-end of last calendar up till now (see chart). On the other hand, the end-cutting prices have been largely higher than the bid prices, except only on two occasions. For instance, on February 2, when BSP auctioned a mere 500 tonnes, the market prices of end-cutting were lower at INR 28,700/tonne against the bid price of INR 29,500/tonne.
The second instance was on March 5, when, for the auction of 18,200 tonnes, the bid price was higher at INR 33,800/tonne against the end-cutting prices of INR 32,500/tonne. In fact, so far, this was the highest price achieved in the auctions.
With the market prices of scrap overall a tad higher, Chhattisgarh buyers preferred the auctioned material.

Scrap Preferred to Sponge Iron

The injection of this large volume of high-grade material has indeed got the market excited since scrap is always preferred over sponge as a smaller quantity is required by the IFs. Secondly, lesser electricity is required to melt it. Thirdly, the ferrous yield is higher and increases overall productivity, said a source.
On the other hand, these are a heavier and harder metal and hence more electricity may be required for its melting. It would ideally be suitable for making billets and blooms.
India’s scrap demand hovers around 37 million tonnes (MnT). Out of this, approximately 30 MnT is available locally while the balance 6-7 MnT is imported.
In such a scenario, if around 120,000 tonnes are auctioned in a single quarter at competitive pricing then it does make a significant difference in terms of scrap supply.