Pakistan: Imported ferrous scrap index down $2/t w-o-w; weak rebar sales dampen buying interest

• Imported scrap inquiries dull as domestic prices decline
  
  
• Subdued rebar sales continue to impact domestic steel market
  
  

Imported ferrous scrap offers to Pakistan slightly declined w-o-w, Pakistani mills are not actively sourcing imported scrap with continued weak rebar sales and competitive domestic scrap prices.

As per market insiders, rebar movement stays sluggish, and for the current week liquidity pressure may persist. So far, India, Pakistan, and Bangladesh are not competitive markets because of high freight rates.

BigMint's weekly assessment of European shredded scrap stood at $405/tonne (t) CFR Qasim, down $2/t from $407/t CFR a week ago.

A steel mill representative said," The market is currently quiet, with little trade activity reported from contacts. Despite some competitive pricing for local materials, overall demand is not supporting a drop in prices. For instance, UK shredded scrap is priced between $405-410/t, while UAE shredded scrap is slightly higher at $408-410/t."

A UAE exporter source commented, "UAE-origin HMS prices remained at $382-385/t and sheared HMS at 393-395/t. The market is under pressure, people have material and there is more material in the pipeline so interest is low."

In the last seven days, about 3,000-4,000 t UK shredded has been booked at $400-407/t CFR Qasim.

Domestic market trends: Rebar and billet sales witnessed a sluggish as there are currently no major construction activities taking place in the country. Unofficial workable prices of rebar were heard at PKR 240,000-245,000/t across regions, whereas offers remained at PKR 245,000-248,000/t.

Domestic scrap prices remain downwards as compared to last week at PKR 138,000-138,500/t, while billets were priced at PKR 204,000-206,000/t.

A major steel mill source from Karachi informed that everyone seems cash-strapped at the moment. UK shredded offers are around $400-403/t, while local scrap is priced at PKR 135-138,000/t and rebar at PKR 245,000/t. Local scrap is cheaper than imported material, which costs PKR 10,000 to 12,000/t more, at around PKR 152,000/t. However, we still have to account for invoice costs of PKR 3,000 to 4,000 when purchasing locally. The main challenge is that demand for steel is virtually non-existent, leaving sellers desperate to offload at any price to meet their obligations.

As per market insiders, the market is quite depressed, with steel sales remaining sluggish. Many are liquidating stocks at lower prices to secure cash flow. Current prices for local scrap at PKR 135,000/t, rebar at PKR 245,000/t, and billet at PKR 200,000/t.

The Pakistani government has pledged to the IMF to maintain a tight monetary policy, ready to increase the policy rate if inflationary pressures arise. Following a 200 basis points cut to 17.5%, the State Bank of Pakistan (SBP) emphasized the need for evidence of moderating core inflation before further reductions. The IMF highlighted the importance of strengthening monetary transmission and reducing fiscal dominance for effective policy implementation. The authorities aim to align inflation expectation surveys with best practices to enhance central bank credibility.

Pakistan's steelmakers, including International Steel, Aisha Steel Mills, and Hadeed Pakistan, have raised prices of cold-rolled coils (CRCs) and coated flat steel products by PKR 10,000/t ($36/t), effective from 11 October 2024. The price hike was attributed to rising global steel and raw material costs, as well as a sharp increase in import offers from China following the implementation of its stimulus measures.

AGHA, a major steel producer in Pakistan of June 30, 2024, had PKR 604.88 million outstanding shares held by 6,357 shareholders, with 52.31% owned by directors and their families. The company experienced significant fluctuations in performance over the past four years, with net profits peaking at PKR.2,036 million in 2021 but dropping to a loss of PKR 5,088.57 million in 2024 due to high inflation, increased interest rates, and external crises. These challenges have constrained construction activities, impacting demand in the steel industry and creating a cautious outlook as AGHA works to stabilize operations amid a volatile market.

Outlook

Market insiders project weak trade flow from overseas markets, although improvements in domestic demand may attract steel mills to procure more domestic scrap. Overall, the global sentiment softened after a sharp rise in prices which will impact future offers for imported scrap in Pakistan near term.