Pakistan: Imported scrap index drops $12/t w-o-w, buyers remain cautious

Pakistan's imported ferrous scrap index has sharply declined by $12/tonne (t) w-o-w due to slow finished steel sales and delayed payments from end-users. Most buyers and traders are adopting a wait-and-watch approach, anticipating a further decline in prices, which they expect to reach $390-392/t, while UAE prices are projected at $400-405/t.

BigMint's assessment of Europe-origin shredded scrap was at $398/t, down $12/t w-o-w.

An official representing a Pakistani mill informed that traders are offering shredded scrap from the UK at $400/t, given the current production levels of 50-60%. Meanwhile, new offers for coils from China to Pakistan have dropped to $460/t, down from $560/t. These lower offers are significantly impacting market demand, leaving buyers uncertain about whether to purchase raw materials or finished products. In the past two weeks, China has experienced an oversupply of CRC and HRC steel products, which could lead to lower prices and market imbalances.

A recent deal was made for shredded scrap from the UK at $395/t and traders are taking advance positions, hoping to capitalise when the market dips further.

The supplier-side sentiment: Following Turkiye's purchase of cheaper Chinese billets, import buying has slowed as buyers paused to assess the market. With some stability now observed in both Turkiye and China, traders anticipate that buying will resume within this week, albeit at a gradual pace.

A representative from a major trading house opined that the market is currently very slow with minimal activity. Prices were at $385-390/t for HMS from Dubai and $395-400/t for UK shredded scrap.

In the past seven days, approximately 5,000-6,000 t of shredded scrap from the UK were booked at $395-400/t CFR Qasim.

Domestic market: Billet and rebar prices continued to fluctuate and now stand at PKR 208,000-210,000/t and PKR 252,000-253,000/t exw respectively. Domestic scrap is priced at PKR 148,000-150,000/t exy, down PKR 2,000-2,500/t. The spread between rebar and domestic scrap prices in Pakistan has exceeded PKR 105,000/t, making raw material procurement more complex and causing buyers to be cautious about their market purchases.

Foreign direct investment (FDI) in Pakistan surged by 64% in July, reaching $136.3 million, driven mainly by higher inflows from China and Hong Kong. The power sector led with $62 million, followed by oil and gas at $30 million. Despite the significant percentage increase, overall FDI inflows remained modest compared to regional peers. Meanwhile, Pakistan's current account deficit (CAD) narrowed sharply in the financial year 2024 (FY'24) to $665 million, showing signs of improvement, with potential for a surplus in FY25 if economic conditions remain stable.

Outlook: The outlook for the imported scrap market remains cautious, with falling prices and weaker demand potentially leading to prices reaching around $390/t by next week.