Pakistan: Imported ferrous scrap sees moderate trade flow, offers rise w-o-w in bearish market

The imported ferrous scrap market in Pakistan experienced moderate trade flows but a noticeable increase in offers w-o-w. Currently, tradable prices stand in a range of $417 to 419/tonne (t). Decent availability of scrap in was seen in the domestic market.

Conversely, in the containerised scrap market, there were reports of multiple bookings for UK/Europe-origin material within the price range of $414 to 419/t CFR.

Market sources indicated that trade volumes of 7,000 to 8,000 t were recorded since last Tuesday.

The situation on the mill side, in terms of production, appears to be unstable due to the recent tariff hikes, which are anticipated to create obstacles in the trade flow for finished steel.

Market participants in Pakistan have noted a noteworthy development in that banks are showing increased flexibility for issuing letters of credit (LCs), and while the scrap generation scenario has improved, its distribution remains sluggish. Additionally, there are expectations of continued depreciation of the Pakistani Rupee (PKR) even under the new mid-term government.

A representative from a mill said the escalated electricity tariff is projected to result in an additional cost burden of approximately PKR 4,200-4,500/t for mills, significantly affecting production.

SteelMint's assessment for shredded scrap from the UK is at $420/t CFR Qasim, up by $4/t w-o-w.

Domestic market overview

The ongoing currency devaluation led to trade flow instability. However, scrap availability remains steady at present.

"The market is improving as compared to last week, due to improvement in demand," said a major mill source.

Rebar & billet prices rise: Rebars and billets prices rose. Prices for deformed grade-60 rebar (10-12 mm) climbed by PKR 2,000-2,500/t ($7-9/t) w-o-w to PKR 255,000-257,000/t ($886-893/t) exw, inclusive of taxes. Similarly, local scrap offers, akin to shredded scrap increased to PKR 174,000-176,000/t ($604-611/t) exy. Similarly, domestic CC billet offers were noted at PKR 230,000-232,000/t($799-806/t) levels, reflecting an increase of PKR 1,000($3/t) w-o-w.

At the time of compiling this report, the currency exchange rate remained largely stable w-o-w at 287.7 against the US dollar.

Other updates-

Bankers have explained that the rupee's depreciation is part of the arrangements made with the IMF for a $3-billion loan programme, and it is unlikely for the local currency to gain strength throughout the fiscal year.

The government has announced the dissolution of the National Assembly on 9 August and subsequent elections to be held within 90 days of the Assembly dissolution, which will support a depressed currency.

Outlook

The steel industry's short-term outlook remains challenged by elevated electricity tariffs, which could lead to higher production costs and hinder steel manufacturing followed by reduced scrap consumption. But demand is expected to increase after a lull period, as per market insiders.