Pakistan: Imported ferrous scrap prices move up w-o-w amid moderate trade
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Imported ferrous scrap prices saw a slight uptick with moderate trading activity due to ongoing electoral reform in the country this week.
Around 3,000-4,000 tonnes (t) of shredded scrap were procured from European origins and the Middle East, priced between $438-444/t CFR Qasim. Additionally, HMS (80:20) was offered from UAE within the range of $415-420/t.
Notably, US offers were also present last week, ranging from $435-440/t CFR, reflecting the impact of their domestic scrap market dynamics.
As per a major steel mill source, "buying is slow as it's election week. Yesterday was off, and Thursday is the election, so we don't expect major activities in 2 days. If a new government comes into the market, we may see some positivity."
Recently, the UAE offered shredded scrap at $450/t, while buyers are aiming for levels around $438-440/t.
As per market insiders, Pakistan's imported scrap market has experienced a notable shift towards imports from the Middle East, particularly the UAE, over the past 3 to 4 weeks. However, there has been a slight decrease in activity observed last week. This decline can be attributed to a disruption in the supply-side loading process following the imposition of export duties starting in February. The penalties for any misdeclaration in export shipments are now substantial, leading to license cancellations.
During this phase, Pakistani buyers might look after Bahrain, Kuwait, and other Middle Eastern regions until the supply and scrap collection points absorb this extra export duty to make the process smooth and regular for exporters.
BigMint's assessment for European-origin shredded stood at $442/t and rose by $3/t w-o-w.
Domestic Market: In Pakistan, finished steel demand was stable, with rebar prices showing minimal fluctuations and sales activity at a nominal level during the election week. Rebar offers hovered in the range of PKR 264,000-268,000/t on an exw basis, while billet offers stood at PKR 223,000-228,000/t, also on an exw basis.
According to a representative from a Pakistani mill, "Rebar prices remained stable this week, with limited sales activity observed in finished steel post-election. No significant increase in activity is anticipated at this time."
The Pakistani government seeks a one-year extension for the Pakistan Raises Revenue (PRR) project, backed by $400 million from the World Bank. The extension, until June 30, 2025, aims to refine the project's objectives and adapt to evolving benchmarks.
Initially planned for five years, the PRR project targets enhancing Pakistan's tax system and revenue collection, with a focus on technological and infrastructural upgrades for the Federal Board of Revenue (FBR).
Despite unchanged budget allocations, the project has made significant strides, including reducing withholding tax lines and expanding the tax base. The extension and restructuring underscore the government's commitment to transparency and efficiency in Pakistan's tax system.
Election update: Major political leaders prioritise growth by voting for their party on February 8. Promising increased employment and reduced inflation and are striving to secure public support for the sole National Assembly seat.
The caretaker government has initiated talks with the IMF to address the circular debt issue, sparking optimism in the market. Experts anticipate a rally in the oil and gas sector, foreseeing potential resolutions ahead of the elections. Faran Rizvi from JS Global advises caution amidst election-related volatility but maintains a bullish long-term outlook for the PSX. Post-election, a favourable market performance is anticipated, barring unforeseen events.
Outlook: Market insiders anticipate that imported ferrous scrap prices will remain range-bound in the coming weeks. The domestic steel and scrap market is expected to show no significant shift following the election week, coupled with constrained LC approvals from banks.
