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Pakistan: Imported ferrous scrap prices rise $5/t; rate cut to support market

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Melting Scrap

BigMint Bureau

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5 Nov 2024, 19:48 IST

Pakistan: Imported ferrous scrap prices rise $5/t; rate cut to support market

SBP policy rate cut aims to boost economic activity

Rebar sales remain slow as mills lift offers to recover losses

Imported ferrous scrap offers to Pakistan increased by $5/tonne (t) this week amid moderate trade activities towards the second half of last week. However, this week the market has experienced dull inquiries from major buyers, with BigMint's weekly assessment of European shredded scrap standing at $395/t CFR Qasim, up from $390/t CFR a week ago.

According to market insiders, the recent policy rate cut is expected to boost overall business activity, including steel, but currently, rebar demand remains low. Shredded scrap offers are at $395-396/t, with workable levels at $390-392/t, varying as per payment terms (LC/CAD).

According to a source associated with a major trading house, "Current shredded scrap levels are attractive at $393-398/t, but market activity remains slow. A small deal purchase was heard completed last week at $390/t, while some sellers are now asking $400-405/t for loaded material".

"Around four-five deals were heard booked from the UK/EU, and 6,000-8,000 t of imported shredded, priced at $388-397/t, arrived in Pakistan over the last seven days,"informed another source.

An official from a steel mill stated, "Market conditions remain largely unchanged compared with last week, with a slight improvement in demand seen. We anticipate stability at these rates going forward."

As per some other market participants, shredded scrap from Europe was offered at $390-398/t, with some deals heard at $393-397/t CFR.

Domestic market scenario

Current rebar prices in Pakistan are PKR 250,500-252,000/t($902-907/t), while local scrap is priced at PKR 148,000-151,000/t($533-544/t). Billet offers have edged up to PKR 210,000-212,000/t($756-763/t) exw.

Prices showed signs of recovery, with scrap rates decreasing by PKR 2,000-3,000/t($7-11/t) w-o-w to PKR 148,500-150,000/t($535-540/t) exy.

As per reports, local Bala prices rose by PKR 5,000/t($18/t), while billet and rebar increased by PKR 4,000/t ($14/t)each. Further, rebar prices are anticipated to rise further as mills seek to recover losses incurred over recent months.

Policy updates

The State Bank of Pakistan (SBP) reduced its policy rate by 250 basis points to 15% on 5 November due to faster-than-expected disinflation influenced by declining food inflation, favourable oil prices, and stable tariffs.

This move, along with the recent approval of Pakistan's IMF programme aims to boost economic activity by improving business and consumer confidence. The SBP projects FY25 GDP growth at 2.5-3.5%, supported by agricultural gains and industrial growth.

Fiscal stability was supported by SBP profits, though tax revenues remain below target. Private sector credit demand has increased as financial conditions ease, while October inflation dropped to 7.2%, with the FY'25 inflation forecast now below the previous 11.5-13.5% range.

SBP Governor Jameel Ahmed announced that October remittances surpassed $3 billion, boosting Pakistan's foreign reserves, with an additional $500 million expected from the ADB this week. This inflow will bring SBP reserves to $11.7 billion, moving toward the FY25 target of $13 billion.

Outlook

Market insiders anticipate a positive outlook following the recent policy rate cut, which is expected to stimulate economic activities, particularly in the construction sector, and drive up rebar demand in the coming days. Additionally, improved remittance flows are likely to support import activity in the near term.