Pakistan: Imported ferrous scrap prices rise $3/t w-o-w; mixed trends prevail in steel market ahead of budget
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Pakistan's imported ferrous scrap market witnessed a sluggish trend, with Eid approaching this weekend and the federal budget announcement expected tomorrow. There is a noticeable absence of new offers from major sources like the UK, US, and UAE, contributing to the subdued market activity; however, offers remain firm from suppliers amid rising freight rates.
Steelmakers in Pakistan are particularly worried about the potential increase in customs tariffs on steel scrap imports and the possible imposition of new taxes on steel raw materials. These changes could significantly impact the cost structure and overall competitiveness of the steel industry in Pakistan.
According to traders, the market is slightly active as mills seek materials for the next production cycle before the mid-June holiday slump. Ahead of the Eid holidays, Pakistan has entered into the market to stock up on raw materials, with recent activities observed at the $420-425/t level.
Around 4,000-5,000 t of shredded scrap from the UK and Europe were booked at $420-425/t CFR Qasim in the last seven days.
BigMint's assessment for Europe-origin shredded stood at $425/t, increased by $3/t w-o-w.
Domestic market: In the domestic market, average rebar offers were around PKR 252,000-254,000/t, a decrease of up to PKR 4,000/t. Demand for finished products remained relatively slow with a moderate expectation for rising demand. Billet prices, however, increased by PKR 1,500-2,000/t w-o-w and domestic scrap prices dropped by over PKR 3,000/t exw basis.
As per market sources, the State Bank of Pakistan's monetary policy rate currently stands at 20.50%, following a decrease of 150 basis points. The decision to slash the discount interest rate after four years was viewed positively, but its impact is expected to be gradual, with further reductions anticipated in the next 12 months.
Market insiders are keenly awaiting tomorrow's federal budget announcement, which is expected to bring significant changes in the steel industry. There is speculation that the sales tax rate might rise from 18% to 19% or higher, and personal income tax slabs could be reduced from seven to five to boost tax collection. Exporters may also face an increase from the current 1% tax rate.
Specific to the steel sector, there are concerns about potential hikes in customs tariffs on steel scrap, re-rollable steel scrap, and ships for demolition. Additionally, new taxes on the import of steel raw materials are anticipated to generate additional revenue. Major steelmakers in Pakistan are apprehensive about these potential changes, fearing that increased costs could impact their competitiveness and overall financial health.
Outlook: Imported ferrous scrap prices are expected to rise as the upcoming budget continues to stimulate market sentiments. However, the market activities may stay subdued during the upcoming Eid holidays next week. Steel demand is forecasted to show a moderate trend, with prices of rebar and billet likely fluctuating within a range.
