Pakistan: Imported ferrous scrap price remains largely stable w-o-w ahead of upcoming election

Demand for imported scrap in Pakistan remained subdued during the week, influenced by a slowdown in domestic finished goods production ahead of the upcoming February elections. Approximately 2,500-3,000 tonnes (t) of shredded scrap were booked from the Middle East and European origins during the week in the range of $435-445/t CFR Qasim. However, other grades like HMS (80:20) were also booked at a price range of $410-415/t.

From UAE, other materials like blue steel were offered at $445/t for 500 t loading, whereas shredded scrap was offered at $460/t for 1000 t loading.

A representative from a steel mill mentioned, "We are currently on hold due to the depressed market conditions. Finding a seller below $430/t is challenging. Payment processing from the bank is posing difficulties with the upcoming elections and weakening forex. Some funding from the IMF is under review for the country's essential operational costs and imports. The steel industry is facing challenges in realizing profits from sales, as the market is not supportive of finished steel utilisation at the moment."

Domestic Market: In the domestic market, Faizan Steel, Naveena Steel, and Moiz Steel adjusted grade 60 rebar prices, increasing them by PKR 3,000/t exw. The revised prices for 9.5/10mm and 12mm rebars ranged from PKR 268,500-271,500/t, while prices for 12mm and above were set at PKR 266,500-269,500/t. These adjustments were made in response to fluctuations in operational costs, rising input expenses, and prevailing market conditions.

A representative from a steel mill mentioned, "Business has been sluggish throughout this entire month, attributed to the upcoming February elections. There is a noticeable absence of significant infrastructure activities in the country at the moment."

The State Bank of Pakistan (SBP) imposed penalties totalling PKR 465.08 million on 10 banks in Q4 2023 for non-compliance with legal or regulatory requirements.

The State Bank of Pakistan (SBP) has maintained the policy rate at 22%, aligning with analysts' expectations. Inflation forecasts for FY'24 were revised upward from 20-22% to 23-25% due to recent energy price revisions. The SBP, waiting for inflation to subside, hinted at potential rate cuts, emphasising that real rates are significantly positive on a 12-month forward-looking basis. Despite expectations of a revival of economic growth, SBP must balance growth with low current account deficits to ensure stability and gradual monetary easing. The SBP anticipates potential rate cuts in the future, possibly starting by the end of April.

The Pakistani rupee closed at PKR 279.55 against the US dollar. Globally, the US dollar held steady ahead of the Federal Reserve's decision.

Outlook: Industry insiders suggest that there is a likelihood of an increase in domestic rebar prices in the coming days. The limited availability of raw materials, combined with uncertainties related to the upcoming elections, is expected to impact market dynamics. The current constrained flow of funds adds to the uncertainty, and market activities are anticipated to hinge on both the election results and viable offers.