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Pakistan: Imported ferrous scrap index rises by $10/t w-o-w; sentiments improve post-IMF's $7-bn bailout

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Melting Scrap

BigMint Bureau

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1 Oct 2024, 20:30 IST

Pakistan: Imported ferrous scrap index rises by $10/t w-o-w; sentiments improve post-IMF's $7-bn bailout

Positive global trends boost prices

But cash flows still remain tight

Imported ferrous scrap offers to Pakistan increased w-o-w amid a rise in Chinese steel prices followed by a positive global price trend. However, Pakistani mills are not in a hurry to procure more volume after looking at dampened rebar sales and minimal production levels across major regions.

BigMint's weekly assessment of European-origin shredded scrap stood at $400/tonne (t) CFR Qasim, a sharp rise of $10/t from $390/t CFR a week ago.

According to market insiders, European shredded scrap offers to Pakistan have increased by $6-10/t, now reaching $405-408/t CFR, with deals closing at $390-405/t last week. In the past seven days, approximately 4,000-5,000 t of shredded and PNS scrap were sold at $390-405/t CFR Qasim.

A steel mill representative commented," The market is slow with cash flows being extremely tight which leads to sluggish rebar sales. Even when sales do occur then the payments are often delayed. Many companies are underselling below their costs in an effort to liquidate inventory, resulting in reduced profitability. Currently, producers are operating at only 40%".

Indications for US shredded scrap were reported at $388-390/t but were subsequently withdrawn as global market sentiments improved. Current HMS offers from UAE Dubai remain at $375-380/t, although buyer interest appears muted.

Market participants indicate that limited offers for UK-origin shredded scrap have been seen at $395-400/t CFR, while buyers express interest at around $390/t. Some sellers are offering graded rebars at PKR 255,000-260,000/t, with domestic scrap priced at PKR 155,000 ex-warehouse.

A recycler noted, "In the last four days, we sold about 2,000-3,000 t, with prices ranging between $388-392/t."

A major trading source informed that the most recent deal for UK-origin shredded scrap was completed at $405/t, with current offers from both the UAE and the UK ranging between $408-410/t.

Domestic market trends: Rebar and billet sales remain dull following the halt in infra projects. Unofficial workable levels of rebar prices dropped by approximately PKR 6,000-10,000/t across regions, whereas offers remained slightly upward, further weakening the market interest for procurement.

Domestic scrap prices continued to decline further and stood at PKR 143,000-144,500/t, while billets were priced at PKR 208,000-210,000/t.

As per a mill side source, "lots of projects are pending, and if they start, the market will automatically improve."

Amreli Steel temporarily suspends operations

Amreli Steels Limited, a leading long product manufacturer in Pakistan, has temporarily halted operations at its Site Rolling Mills (SRM), responsible for 30% of its output due to challenging market conditions. The company faces declining steel bar demand amid rising utility costs, high interest rates, and unfair competition from smuggling. While the SRM is offline, the Dhabeji steel plant, contributing 70% of production, will continue operations. Amreli plans to reassess conditions in six months for potential resumption.

IMF approves $7-billion bailout for Pakistan

The IMF Executive Board has approved a $7 billion Extended Fund Facility for Pakistan, with an immediate disbursement of $1.1 billion on an immediate basis. The Prime Minister expressed satisfaction with the approval, emphasising ongoing structural reforms aimed at stabilising the economy and improving macro-economic conditions. However, challenges such as rising utility costs and the need for increased tax collection remain. Future improvements will depend on effective reform implementation and sustained international support.

This timely support is crucial as Pakistan faces approximately $26 billion in loan repayments this fiscal year, which began in July, according to Pakistan State Bank Governor Jameel Ahmad.

Outlook

As per market insiders, the outlook is cautiously optimistic. Demand is expected to improve as the worst seems to have passed, with positive indicators pointing to government measures aimed at boosting production. The IMF's $7-billion bailout is projected to enhance long-term market sentiment, easing dollar availability and likely leading to lower interest rates.

Market participants feel public confidence will play a crucial role in recovery. Additionally, the recent rebound in Chinese prices has provided some relief to buyers, likely encouraging renewed interest in imports in the near future.