Pakistan: Imported ferrous scrap prices drop $15/t w-o-w; buyers adopt wait-and-watch approach

In Pakistan, market activity remained relatively sluggish despite a sharp drop in shredded offers from the UK and Europe ranging from $415 to $425/t, with limited bookings observed at this level, resulting in a quiet market and a $15/t decrease compared to last week. Slow purchasing behaviour persists as buyers aim to lower their average procurement costs.

BigMint's assessment for European-origin shredded stood at $416/t, down 15/t w-o-w.

According to the majority of market participants, it's anticipated that shredded prices may hover around $405-410/t, while HMS from the UAE could reach up to $375/t on a CFR Qasim basis. The UAE market has encountered some pressure lately due to export hurdles. However, it's believed that increased procurement interest from Pakistan could help stabilise prices.

A trader source mentioned, "With the formation of the new government and the conclusion of utility bills week, along with Ramadan approaching within a week, customers may continue purchasing at the adjusted price levels."

According to a prominent mill source, market trends are indicating a downward trajectory, with no significant buying activity observed. Deals are now potentially achievable below $420/t. Expectations are to maintain levels around $410-415/t as mills await clearer market conditions. Some suppliers have even suggested lower rates, compounded by the lack of support from current steel prices for elevated scrap prices.

Another mill source suggests that the government's potential announcement of new projects to stimulate the economy could render the Pakistan market more appealing once again.

Recent deals:

Around 2000 t of shredded from Europe was sold at $420-425/t on a CFR Qasim basis.

Approximately 750 t of Europe origin shredded was booked at $428 on a CFR Qasim basis.

Domestic market: In the domestic market, local scrap offers and indicatives were reported at PKR 160,000-164,000/t ($573-584/t) on an exw-Punjab basis, respectively. Similarly, rebar offers were heard at PKR 261,000-263,000/t($934-941/t) on an exw basis, whereas billet offers were heard at PKR 220,000-223,000/t($787-798/t) on an exw basis.

As per a mill-side source, "rebar and billet sales experienced sluggishness last week, but an uptick in activity is expected this week due to positive political sentiments and clearer weather conditions."

IMF discussion: In a significant development, Pakistan's newly elected Prime Minister, Shehbaz Sharif, has instructed his team to promptly initiate discussions with the International Monetary Fund (IMF) regarding the Extended Fund Facility (EFF). Emphasising the urgency of the matter, the Prime Minister directed the preparation of an emergency action plan to address the economic challenges, highlighting that revitalising the economy is the foremost priority of the new government.

Experts anticipate that a fresh negotiation, i.e., in the 24th IMF programme, will be a key priority for the new government.

Currency exchange: The Pakistani rupee experienced a marginal decline of 0.02% against the US dollar in the inter-bank market, settling at 279.31 as reported by the State Bank of Pakistan (SBP) on Tuesday. This follows a slight depreciation on Monday, when the rupee settled at 279.26 against the greenback.

Outlook: Insiders suggested a sluggish pace in the scrap market, with most buyers adopting a cautious approach, anticipating further declines in offers. Sellers, feeling the pressure, are aggressively issuing offers.