Pakistan: Imported ferrous scrap market remains gloomy, offers unchanged

Pakistan's imported scrap market has remained bearish for yet another week. The continuous rain, high-interest rates, and limited finished steel demand made buyers cautious.

Steel producers are facing a liquidity crisis and sales issues as transportations are adversely affected by floods majorly in Karachi and Lahore.

"Once the flood situation improves and the transportation infrastructure is back to normal then there is a possibility of demand improvement," said a Pakistani scrap trader.

Some mills stepped back and shut down production for the entire month to balance out demand and supply. Market participants are expecting the market to improve from mid-October whereas suppliers are trying to increase offers.

Fresh offers for UK-origin shredded scrap are at $440-450/tonne (t) CFR, largely stable. Surprisingly, there is a rumour in the market that prices went up in the country. However, the market remained firm w-o-w.

A few deals of around 500 t of shredded scrap concluded yesterday at $445/t, CFR Qasim.

Ferrous scrap imports up in Aug: Pakistan imported 279,485 t in August 2022 as against 173,348 t in July, up significantly by 61% m-o-m. Import volumes in January-August 2022 totalled 2.11 mnt, a decline of 18% as compared to the same period last year.

Factors weighing down the market:

• PKR slides against dollar: The Pakistani rupee (PKR) slipped further against the US dollar (USD) in the currency exchange market. The PKR is now trading at 239.25 against the dollar. The dollar remained strong as the constant fall in the local currency forced the importers to pay record high prices.
  
  
• Mills halt further orders: The uncertain fluctuation against the dollar has resulted in further devaluation of PKR, which is impacting the cost of inputs of major plants. As a result, major mill Agha Steel Industries temporarily closed taking further bookings from 21 September, 2022 owing to sluggish demand for finished steel products.
  
  
• Domestic market firm: Domestic rebar demand and the increased cost of production have kept markets volatile. Offers for G-60 rebar (10-12mm) are at PKR 218,000-220,000/t exw-Punjab, including taxes. However, the tradable value is lower by PKR 3,000-4,000/t ($13-17/t) exw, depending on payment terms.
  
  

Outlook: An uptick in the coming months is likely to happen as infrastructure construction would start soon post-monsoon and floods. Additionally, demand may arise as roads and rail links have been damaged by floods.