Pakistan: Imported ferrous scrap prices fall $8/t w-o-w amid cautious buying, uncertain sentiments

Pakistan's imported ferrous scrap prices slid by $8/tonne (t) w-o-w due to weak steel demand in the country and reduced government-approved construction activity. Dull steel demand continues to overshadow fresh inquiries from end-users.

Post-monsoon, it was expected that demand will improve but market remains mostly stable at the moment in terms of trades with a downtrend seen in prices.

BigMint assessed European-origin shredded scrap at $392/t, down by $8/t w-o-w.

HMS (80:20) and mixed materials from the UAE were heard to be at around $370-380/t. Similarly, shredded from the UAE remained competitive with European/UK-origin scrap, both of which hovered at $390-395/t CFR Qasim.

Market commentary

According to a UAE-based trader, the drop in shredded scrap prices has made Pakistan's imported scrap market subdued, with limited inquiries and few deals. Negotiations have mostly focused on securing better pricing and quality.

"Our export market is sluggish due to weak demand from Pakistan. Buyers are pushing for further reductions in the prices of shredded scrap to $385-390/t. This price is significantly lower than what was previously offered for HMS (80:20)," he added.

As per another market source, there are complaints about the quality of exported material, particularly from Abu Dhabi. Issues with yield and impurities have emerged, prompting buyers to demand better quality before committing to further purchases.

Market insiders indicate that the market is generally depressed, with suppliers pushing unsold material and even selling at minimal margins, sometimes as low as $1-2/t. Over the past 12-15 days, significant losses have been incurred.

A major steel mill source said, "Imported shredded scrap offers remained stable at $395-400/t, with deals closing at $390-395/t. HMS (80:20) from the UAE ranged at $380-385/t, but there is immense pressure on scrap suppliers."

Around 4,500-5,000 t of UK- and UAE-origin shredded scrap were booked at $390-400/t on a CFR Qasim basis during the last seven days.

Domestic market remains muted: Rebar and billet prices in Pakistan remain under pressure amid a persistent liquidity crisis and ongoing political instability. The Central Bank cut interest rates by 2%, but the market outlook remains cautious.

A few mills are considering halting production, and many units have shut down for short periods.

Local scrap remains cheaper than imports, with the rebar-to-domestic scrap price spread at PKR 102,000-107,000/t, as customers anticipate a potential pre-winter demand boost.

As per a steel mill source, rebar and billet prices remain stable and are unlikely to see improvements lately, which has provided limited relief to the industry. The market is quite distressed that unbranded bar prices are at around PKR 230,000-235,000/t, with no significant signs of market recovery expected post-monsoon. Although some mills offered rebars at PKR 255,000-260,000/t, they were unable to find any interest from end-users.

Pakistan's trade deficit with China decreased slightly to $3.58 billion in July-August 2024 compared to $3.74 billion in the same period of the previous year, but the country continues to grapple with significant debt issues. China holds 20-25% of Pakistan's total foreign debt, while the most of the rest is owed to Western institutions. Despite lower interest rates on Chinese loans (for the China-Pakistan Economic Corridor) compared to Western loans, Pakistan faces ongoing challenges with high trade deficits and substantial foreign debt. These issues underscore the need for Pakistan to enhance productivity, diversify its exports, and effectively manage its financial obligations.

Outlook

The imported scrap market is expected to remain under pressure due to weak demand. Imported scrap prices may continue to decline as buyers seek lower costs. However, no significant signs of market recovery are expected post-monsoon.