Pakistan: Imported ferrous scrap prices rise $4/t w-o-w on pre-Eid restocking

Imported ferrous scrap prices in Pakistan increased slightly w-o-w. Steelmakers responded to domestic raw material shortages by raising rebar offers, anticipating heightened inquiries and buying activity ahead of Eid. Shredded scrap offers were majorly heard between $420-427/t last week, with nominal volumes booked due to active restocking.

Around 3,000-3,500 t of shredded scrap from the UK and Europe were booked at $420-424/t CFR Qasim in the last seven days.

Pre-Eid holiday buying is expected to persist this week, followed by sentiment-driven local markets which witnessed price increases for finished products. Despite rebar sales below-offered prices, several mills increased rebar prices by PKR 5,000-8,000/t, sparking significant market activity and providing a necessary push to the sluggish market.

Additionally, as per a few EU suppliers shredded scrap offers in Pakistan are at $427-430/t on a higher side as compared to last week's average offers at $422-425/t. This challenging market environment reflects the broader difficulties facing the steel industry.

A major trading house official said, "The market conditions are currently unfavourable, making new bookings too risky. We are hoping for a business-friendly budget and a significant reduction in interest rates, especially as inflation has dropped to 14%. The current interest rate of 22% has severely impacted the economy, which seems to have been the intention. We anticipate a gradual 6% decline in interest rates over the next year."

Domestic market: Domestic scrap indicative offers were heard at PKR 155,000-157,000/t exw whereas CC billets were priced between PKR 215,000-218,000/t. Several steel mills, including Agha, Naveena, and Faizan, temporarily suspended rebar sales from 28-30 May until further notice. Concurrently, Amreli Steels, another major player, has revised its booking rates effective 30 May, for Lahore and Islamabad.

In Lahore, distributor rates are now PKR 264,000-265,000/t for sizes 9.5/10mm and PKR 263,000-264,000/t for sizes 12mm and above. Similarly, in Islamabad, rates are PKR 267,000/t for sizes 9.5/10mm and PKR 265,000/t for sizes 12mm and above. These adjustments underscore significant shifts in rebar pricing strategies among major steelmakers, responsive to evolving market conditions and demand dynamics.

As per major steelmakers. demand for steel remains weak, forcing mills to operate at significantly reduced capacities, around 40-50%. Currently, branded quality steel is priced at PKR 257,000-260,000/t, commercial grade at PKR 240,000/t, billets at PKR 215,000/t, and scrap at PKR 157,000/t.

As per market insiders, mills are currently shut down, with one major mill laying off workers and production averaging only 30%. Rebar and scrap prices have increased despite the lack of active buying and selling. With just two working weeks left in June, the market is expected to slow further as the Eid holidays approach. Recent holidays have already tightened payment flows significantly. Additionally, production levels are stagnant at 30-35%, and an interest rate adjustment from the Monetary Policy Committee (MPC) is anticipated.

Outlook: The market foresees higher imported ferrous scrap prices as pre-Eid holiday buying continues to boost demand. This surge in activity follows recent price increases in the local market for finished products. However, a slowdown is expected as the Eid holidays approach, further straining payment flows already impacted by frequent holidays.