Pakistan: Imported scrap market subdued amid negative market sentiments

Pakistan's imported scrap trade activities are moving at a slow pace. Negative sentiments are pushing buyers and steelmakers to the sidelines. The market is currently plagued by limited cash flows, electricity tariff hikes, LC issues, and bearish demand from end-users, SteelMint understands.

Meanwhile, imported scrap prices continued to move south. However, deals are happening in limited quantities as per requirement.

Fresh offers for UK-origin shredded scrap in containers are at $425-430/tonne (t) CFR, moving down by around $10/t w-o-w. Additionally, buyers' bids were seen at $410-415/t and a couple of deals have been heard at these levels. "Buyers are showing less interest in booking any fresh slots on inadequate demand," said a market source.

Furthermore, many mills are opting to continue restocking from the domestic market. Domestically sourced scrap is being traded at PKR 110,000-115,000/t levels, which is immediately available and cost competitive as compared to imported material, for the time being.

Ferrous scrap imports fall over 20% m-o-m in Sep'22: Pakistan, South Asia's major ferrous scrap buyer, imported 214,435 t in September as against 279,485 t in August, down significantly by 23% m-o-m, as per customs data. Import volumes in January-September 2022 totalled 2.32 mnt, falling by 20% as compared to the corresponding period last year.

Market sentiments remain unsupportive

• PKR falls further against dollar: The PKR remained under pressure as it continued to depreciate in the currency exchange market. Currently, the PKR is being traded at 221.5 against 219.6 seen last week, making imports costlier.
  
  
• Major mills lower rebar offers by PKR 9,000/t ($41/t): Amreli Steels Limited, one of Pakistan's leading steel producers, announced another price cut in rebar by PKR 9,000/t ($41/t), SteelMint learnt from sources. After revision, fresh offers are at PKR 216,000/t ($977/t) for 9.5/10- 12mm, and PKR 214,000/t ($967/t) for 16mm and above, effective from 31 October. However, tradable prices are at PKR 205,000-210,000/t exw levels.
  
  

Pakistan domestic prices

• Rebar sales drop: Domestic demand for finished steel remained subdued as sales have fallen significantly by around 50-60% in the last two months, SteelMint learnt from sources. Mills have cut down production on demand-supply mismatch. A prominent Gujranwala market in the Punjab region remained closed, waiting for clearer market directions.
  
  

Positive outlook for end-Nov'22

Industry experts anticipate that mills are likely to fall short of scrap inventories in the near term, as the winter season is the most favourable time for construction activities. Finished steel sales may improve from the second half of November, considering that some government-funded construction and infrastructure projects may see some improved activities.

However, mini-mills are still cautious due to increased input costs and lesser margins from rebar sales - factors which are creating challenges to maintaining a cash flow.