Pakistan: Imported ferrous scrap prices stable amid minimal trade post-election

Pakistan's imported ferrous scrap prices remain stable with minor fluctuations throughout this week, as buyers majorly witnessed several deals this week ranging from 435-444/t for shredded scrap from the US and Europe.

However, Offers and indicatives for shredded scrap from Europe were at $440-444/t CFR Qasim.

Around 5,500-6,000 tonnes (t) of shredded scrap were procured from the UK, Poland and the US priced between $434-444/t CFR Qasim.

A trader source mentioned, "Import volumes from the UAE into Pakistan witnessed a sharp drop post-export duty imposition, which made exporters sceptical about future bookings. However, fabrication offers from the UAE were heard at $440/t, and for HMS PNS mix scrap $415-420/t is being offered for Pakistan."

As per mill sources, "Market activity is sluggish, primarily attributed to delayed payments amid ongoing elections. Offers for shredded scrap from the EU are ranging from $438-442/t on a CFR Qasim basis."

Another trader source informed, "An offer from Europe heard at $455/t for prompt shipment indicating some activity amidst the slower market conditions."

Amid the post-election political confrontation, there are calls for a broad-based national government to steer the country out of its economic and political crisis. Investors' confidence is waning due to uncertainty, leading to capital flight to other countries.

A representative from a trading company commented,"Market activities have decelerated post-elections, with payments experiencing delays."

Domestic market: In the domestic market, local scrap prices were reported at PKR 160,000/t for cash transactions and PKR 169,000-170,000/t ($587-601/t) exw.

Additionally, both Amreli Steel and Faizan Steel have recently increased prices for grade 60 rebars by PKR 3,000/t ($11/t), effective from 12-13 February. This adjustment is in response to recent fluctuations in operational costs, escalating input expenses, and prevailing bearish market conditions. Revised prices are now at PKR 274,000-276,500/t ($979-988/t) for 9.5/10 mm and 12 mm rebars while prices for 16 mm and above were noted at PKR 272,000-274,500/t ($972-981/t). Billet indicative offers were heard between 225,000-228,000/t ($806-817/t) on an exw basis.

Currency exchange rate: The Pakistani rupee experienced a marginal increase of 0.01% against the US dollar in the inter-bank market, closing at 279.31 on Tuesday, following a gain of Re0.02. This slight uptick comes after a minor dip on Monday when the rupee settled at 279.33 against the greenback.

In a significant development, the International Monetary Fund (IMF) expressed concerns over Pakistan's energy sector, stating that the government's tariff rationalisation and circular debt management plans fail to address underlying issues. IMF Mission Chief Nathan Porter emphasized the critical need to restore the energy sector's viability for Pakistan's economic recovery and fiscal sustainability.

Trading activity in Asia was subdued, with Chinese and Hong Kong markets closed for the Lunar New Year holidays. Investors awaited the release of consumer prices data in the US, the world's largest economy.

Oil prices experienced a slight uptick on Tuesday due to ongoing uncertainties surrounding conflicts in the Middle East. However, concerns persisted regarding central banks maintaining higher interest rates to combat inflation, potentially impacting energy demand. Brent futures rose to $82.30 a barrel, while US West Texas Intermediate (WTI) crude reached $77.23 a barrel. Oil prices remained relatively flat on Monday after recording a 6% increase the previous week.

Post-Election effects: The uncertainty following the 8 February general elections has left businessmen apprehensive, fearing prolonged political instability and economic turmoil. The incoming government faces the challenge of implementing critical reforms, which are non-negotiable under an impending IMF program. However, these reforms were notably absent from major political parties' manifestos.

The need for a longer, larger, and more reform-centric IMF program is urgent, yet it is not featured in any major party's agenda. Inflation remains a pressing concern, demanding swift solutions that may be challenging to deliver. Tight fiscal discipline, essential for controlling inflation and reducing borrowing costs, will be mandated by the IMF.

Furthermore, privatisation and broadening the tax base are crucial but contentious issues. The absence of a clear procedure for decision-making raises questions about the government's ability to make tough calls and collaborate with the opposition.

Outlook: Given challenges like high interest rates, unemployment, and declining industrial production, there's an urgent need for political stability and economic growth. Moderate trading in imported ferrous scrap is anticipated amidst the current economic conditions.