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A year on following Indonesian customs’ seizure of thousands of containers carrying ferrous scrap for alleged contamination, scrap importers have switched to buying shredded scrap instead.
This is due to tighter regulations on the import of scrap materials, and particularly a lack of clarity over what are considered impurities.
In the past, it took a couple of weeks for customs to clear an HMS cargo. Now, the container inspection and rejection process can take as long as 60 days, one Singapore-based scrap trader said.
He said selling HMS cargoes to Indonesia was no longer “a viable option”.
Detainment and port charges accumulate with each day that an HMS cargo is held at the port awaiting clearance. As a result, importers want these potential costs to be factored into the purchase price, which makes the sale of HMS cargoes financially unviable, he explained.
On the buyer’s side, there is also the uncertainty of whether the HMS cargoes will be cleared in the end, sources said.
“For companies that have the import licence, basically they are only able to import shredded scrap without any problem. Other than shredded, there will be a strict inspection and no guarantee that the scrap will be released,” an Indonesian source who operates a melt shop in Gresik said.
“The problem is still on the regulation since they don’t allow any impurities. How can we import such scraps without impurities?” he said, echoing the sentiment of many market participants.
Impurities mean anything that is not steel scrap, he explained. Even though it may be only one drop of oil, the authorities will say that it is an impurity and a hazardous material, he said.
The Indonesian Iron & Steel Industry Assn could not be reached for comment.
The preference of Indonesian scrap importers these days is not just shredded scrap, but “premium scrap” such as plate and structural scrap (P&S), another Singapore-based trader said.
The trader has also switched out of trading in HMS, and is now focussing on shredded and prime industrial scrap instead.
Prime industrial scrap is of interest to steel mills because of its low impurities and high yield during production. Apart from that, the price gap between shredded scrap and P&S has narrowed in recent months, making P&S more affordable than previously, the second Singapore-based trader said.
Prime scrap usually sells at a big premium over HMS and shredded scrap when the steel market is strong. However, it sells at only a moderate premium in a weak steel market.
