FOCUS: Indian steel exports under threat amid worker shortage, freight problems

Exports of ferrous materials from India could become more logistically challenging in the coming weeks while the country battles the Covid-19 pandemic, market participants have told Fastmarkets.

The worst may still be to come for steel exports out of Covid-hit eastern India, sources said, because of a lack of available stevedores, forces majeures at ports and reduced steel output at certain plants.

  • Lack of truck drivers and stevedores slows steel exports from some ports in eastern India.
  • Concerns over vessel supply, material quality and freight costs dissuade traders from buying Indian induction furnace (IF) billet.
  • Force majeure declared at Visakhapatnam and Gangavaram ports. Steel shipments continuing, slowly, out of Gangavaram at the time of publishing on Wednesday May 12.
  • Production at electric-arc furnaces (EAFs) and IFs disrupted by redirection of oxygen supplies to hospitals for medical use. Blast furnace (BF) output more stable.

Indian steelmakers have orders for several hundred thousand tonnes of semi-finished steel exports due to be shipped in the next two months, with most of them sold to China and scheduled to be shipped from the east.

Some sources feared that delayed or cancelled shipments from India could lead to a further spike in steel billet prices into China, with recent sale prices for Indonesia-origin billet at a huge $790 per tonne cfr, with offers heard at $800 per tonne cfr.

Sources outlined to Fastmarkets three areas of concern relating to the export trade out of India. These were cuts in steel production at some plants, the difficulty in getting vessels and getting material onto vessels, and uncertainties over shipping material into China.

Getting material to port
As well as production cuts at plants where oxygen supplies have been re-routed to intensive care units, one of the major issues delaying steel shipments out of east India has been a lack of available workers to move material, an Indian BF steelmaker source told Fastmarkets.

“There have been lots of people affected by this pandemic and there has been a lack of stevedores because some of them have been ill. Stevedores are very skilled people - you can’t just pick someone up off the street and put them into this job,” he said.

Two steel trading sources, who both have outstanding steel billet shipments to be made out of east India, said that a lack of workers at plants and ports in east India was delaying exports of steel.

“Things have slowed down for sure, but nothing has stopped on the export side for now,” the first trader said.

“There are not enough truck drivers to get material to the port, and some highways are closed due to lockdowns in some areas,” a trader in Shanghai said.

The Visakhapatnam Chamber of Commerce declared force majeure at the Port of Visakhapatnam from May 5-19 in light of the partial lockdown in place in Andhra Pradesh state in east India. The nearby Gangavaram Port, used by Indian steelmaker Vizag Steel (RINL), was also under force majeure, sources said, but steel shipments there were said to be moving - albeit slowly.

Chennai port was operating with lower staffing levels while Kandla port, a key steel scrap harbor, was rumored to have reduced or suspended operations temporarily.

Getting steel to China
It has become clear in recent days that getting material onto the water is only half of the battle facing Indian exporters.

Sources said that vessels which have come from India must serve a 20-day quarantine at Chinese ports before cargo can be discharged, meaning that shipowners were trying to avoid coming to India, and were thus creating a vessel shortage.

“I don’t blame the shipping lines for not wanting to go to India, but at the same time we need them to,” an aluminium scrap seller said. He added that there were worries of a repeat of problems faced in previous Indian lockdowns such as delayed payments, and protracted port clearances.

India-China freight rates have gone up from $50 per tonne in April for 30,000 tonnes of steel billet in bulk, to at least $60-70 per tonne, with some sources saying that $100 per tonne may soon be a possibility.

“Freight costs are high, there are not enough vessels and shipowners will charge extra for the quarantine waiting time. There is a big risk in buying from India on pre-payment terms now- what if we can’t get the material quickly and the steel market falls down?” the Shanghai trader asked.

“Our mill is not suffering very badly and we are at 95% operating capacity, despite supplying medical oxygen, [but] if there is low availability of vessels, that is a problem,” a second Indian BF steelmaker source said.

A third Indian mill source said that there were rumors of Indian vessels being rejected at Chinese discharge ports in recent days, but this could not be verified by other sources.

He said that Chinese ports were more likely to reject steel shipments from India because they must be discharged manually, while iron ore shipments are unloaded mechanically and pose less of a risk of passing on the Covid-19 infection.

There appeared to be growing panic about India’s situation among the shipping industry. The crew of a 48,500-deadweight tonnage general cargo bulk vessel are protesting against their employer’s instruction to sail to India, because of the Covid-19 crisis in the country, according to shipping journal Lloyd’s List.

This follows a report from Chinese newspaper Global Times on April 29 about 11 Chinese crew members on a vessel arriving in East China’s Zhejiang Province testing positive for Covid-19 infections, suspected to have been contracted in India when the ship called at the port of Kakinada in east India.

Julian Luk in London contributed to this report.

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