Weak rupee hits Indian scrap metal imports.

A weaker rupee has cut India's scrap metal imports this month, forcing buyers to look for cheaper domestic alternatives, the vice-president of the Metal Recycling Association of India (MRAI) told Reuters on Thursday.

The rupee has lost about a quarter of its value against the dollar in the last year and while a weaker currency should boost exports, which in turn should rebalance the exchange rate, global economic weakness means India is finding it difficult to export more.

"Things have been difficult for importers this month; the exchange rate just makes it much more challenging to buy scrap. The extreme volatility has caused a lot of chaos," said Zain Nathani, vice-president of the MRAI.

Indian steel makers are using less imported scrap and replacing it with domestic scrap or alternative raw materials such as direct-reduced iron.

Imported heavy melted scrap 80:20 mix, traded at about $480-490 a tonne cfr Nava Sheva, India, in the first quarter this year and demand was good due a recovery of the rupee against the dollar.

In the last few weeks though, demand was very weak as the rupee lost ground once again.

Although prices fell to about $460 a tonne cfr Nava Sheva , sales were few and far between.

"But the market can turn around at any time," Nathani said.

"Maybe the first few weeks of June could be a bit soft but I don't see these numbers lasting. If the exchange rate moves a bit in Indias's favour you'll see the Indians right back at these numbers."

In the meantime the Indian government has come out with new regulation to try and cap fraud in the metal scrap sector. It has released new criteria for enlisting agencies who give pre-shipment inspection certificates.

"The old lists will be cancelled as a lot of fraudulent certificates had been issued, which caused a lot of problems in terms of empty containers arriving in India," Nathani said.

Source : in.reuters.com