Pakistan: Domestic Steel Prices Shoot Up on Currency Depreciation

Sharp currency depreciation has resulted in a sharp hike in domestic steel prices. However, following the global downturn, imported scrap prices in Pakistan are hovering at around 5-6 months low.

SteelMint learned in recent conversation with industry participants that Pakistan's steelmakers have raised their offers of finished and semi-finished products sharply post announcement of the budget and following further currency depreciation by around 4% however, clarity on the changes made in tax structure and various parameters in the country's budget announced last week is still awaited.

Pakistani Rupee devalued to a record high levels of 157-158 against USD which was around 151-152 levels during the last week.

Demand turns stable but concerns over budget loom - Although local steel market has turned fully operational post-Eid holidays, concerns loom on the budget being passed in the parliament. Many steel mills hold their sales due to lack of certainty in the market and it is being expected that market may fully be stabilized by the closing of this week.

Slowdown in production activities at Gujranwala steel market - Local bala and scrap prices increased in Gujranwala market amid reassessed production activities. SteelMint's assessment of local billet jumped to PKR 89,000-90,000/MT (USD 566-572) ex-works up PKR 7,500-8,000/MT (USD 48-51) against the last week's report. CC billet G-60 reported at PKR 95,000-96,000/MT, ex- works. Domestic scrap prices equivalent to Shredded surged to PKR 67,500-68,500/MT (USD 429-436) ex-works inclusive of taxes in Gujranwala.

Rebar asking rates in South jump sharply PKR 7,000/MT (USD 45) - In line with the anticipation of country's leading mills, local steel prices have jumped sharply post an announcement of the budget. Asking rates of Southern region (Karachi) based steel mills reported at around PKR 109,500-110,500/MT, ex-works inclusive of local taxes.

Following changes in tax structure local transport rates have been doubled which has influenced steel prices as imported scrap is mainly transported to the northern region via road after arriving at Port Qasim.

Furthermore, 17% FED announced in the budget to be introduced after 1st July is expected to result in a jump in steel prices.

Imported scrap prices continue downtrend by USD 5-7/MT - Imported scrap prices showed further downtrend following weakening global scrap prices. SteelMint's assessment for containerized Shredded 211 scrap from US and UK stands at USD 315-318/MT, CFR Qasim, down USD 5-7/MT against the last week. However, few limited quantity deals also reported in the range of USD 313-315/MT, CFR Qasim for US origin shredded scrap. Current market prices have lowered to almost 5-6 months low but prior to this, Shredded scrap had fallen below USD 310/MT, CFR Pakistan in early Oct'17.

An assessment of Dubai origin HMS 1 moved down by USD 8-10/MT after returning from Eid holidays to USD 320-322/MT, CFR while HMS 1 of UK origin reported at around USD 310/MT, CFR Qasim.

SteelMint's assessment of imported HMS 1&2 (80:20) has dropped further to USD 280-285/MT, CFR Turkey for Europe origin. Currently, limited trades are being reported but scrap imports likely to pick up with stability in demand amid low inventories available and jump in local steel prices in the short term.