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India

It has been a difficult summer for India’s secondary metals industry as global sentiment weighs heavily on business. While the Indian rupee has performed well against other currencies, it has lost around 7% against the US dollar in the year to date, which has put margin pressures on the industry given that it depends on imports for its scrap raw materials. In addition, industry has had to deal with delays in inbound shipments caused by a fuzzy and overbooked container shipping infrastructure.

The combination of demand tapering off, falling LME prices and a weakening rupee has made for a bumpy journey over the last couple of months. Possibly helping in some cases are LME-linked formula contracts with open pricing on scrap buying; many Indian consumers of aluminium, copper, brass, zinc and lead scraps have veered towards open-priced contracts which allow them to fix values closer to vessel arrivals or consumption. This has cut market risks on account of long shipping periods as sales of downstream products are mostly on a spot basis.

A lot of new capacity expansions planned for this year in secondary alloys may be delayed owing to sluggish export markets. Smelters/producers are now digging deeper into domestic demand as this provides a little extra insulation and security if global markets were to be routed. This augurs well as automotive sales in the April-June quarter saw a significant uptick from the same period last year. Sales of white goods have also picked up despite inflationary pressures.

Despite a bumpy run, India is still expected to grow its GDP by at least 7% this year, giving reassurance about the strength of fundamentals. The Reserve Bank of India recently announced that it will allow cross-border trade transactions in rupee - a step towards the internationalization of the currency. The possibility of currency settlements of exports/imports in rupee could spur global trade and boost exports.