Pakistan: Imported scrap offers rise sharply by over $10/t w-o-w with nominal bookings

The imported ferrous scrap prices witnessed a significant rise this week as moderate buying activity was observed in Pakistan as buyers captured volume on a rising phase of offers, especially from the European suppliers. In the middle of last week, the demand for imported scrap was moderate, influenced by weak domestic finished steel sales and delays in opening LC. However, as the week progressed, buyers began re-stocking, fearing further price hikes by suppliers.

Market sources indicated that only a few suppliers were providing offers, and these offers were not firm as they were obtaining better realisations in alternative markets.

A trader commented, "We are awaiting firm offers as prices have already increased, and suppliers are exercising caution in anticipation of additional rises."

Another mill person commented, "The market is currently slow with finished steel sales remaining sluggish majorly affected by a sharp rise in global scrap price and weak operational advantage from buyers."

Approximately 11,000-12,000 t of shredded scraps were booked from the UK and Europe during the week in the range of $420-422/t CFR Qasim.

SteelMint's European-origin shredded scrap assessment stood at $435/t, witnessing a sharp increase of $13/t w-o-w.

Domestic market: In Pakistan, market remained relatively slow as compared to the previous week as domestic rebar offers were heard at around PKR 265,000-270,000/t exw, however, market activities were reported at relatively low price. Local billet offers were heard at around PKR 210,000/t exw and mill-wise billet offers varying from PKR 225,000-230,000/t exw. Domestic scrap offers were heard at around PKR 160,000-168,000/t exw basis, depending on the region.

Policy rate: As expected, the State Bank of Pakistan's Monetary Policy Committee (MPC) maintained the key policy rate at 22%. The decision considers the impact of the recent increase in gas prices, which led to higher-than-expected inflation in November. The MPC acknowledges potential implications for the inflation outlook, balancing factors such as reduced international oil prices and improved agricultural produce availability. Despite these considerations, the committee notes that the real interest rate remains positive on a 12-month forward-looking basis, with an expectation of inflation following a downward trajectory.

According to Topline Securities, 63% of key market players foresaw no adjustment in the key rate.

Recent data from the Pakistan Bureau of Statistics indicates that November's inflation reached 29.2%, a slight uptick from October but significantly lower than the peak of 38% in May. The increase was primarily attributed to a substantial rise in gas prices, soaring by 520% in November, and elevated electricity rates.

GDP indication: Real GDP recovery during FY'24 was expected to remain moderate. The MPC further pointed out that inflation expectations of both consumers and businesses, though improving in recent months, remained at an elevated level.

Auto sector: Auto assemblers grappled with a challenging scenario as y-o-y car sales plummeted by 53%, trucks by 48%, buses by 45%, and light commercial vehicles, pickups, and vans by 37% during the initial five months of FY'24. Two/three-wheelers also experienced a 13% decline in sales over the same period.

Currency exchange: As per the State Bank of Pakistan (SBP), the PKR settled at 283.78 after an increase of PKR 0.12.

In the open market, the PKR remained unchanged for both buying and selling against USD, closing at 281.75 and 284.75, respectively.

Against the Euro, the PKR remained unchanged for both buying and selling, closing at 305.00 and 308.00, respectively.

Against AED, the PKR lost 10 paise for both buying and selling, closing at 77.40 and 78.10, respectively.

Outlook: As per market insiders, further price increases in imported scrap are anticipated even though domestic rebar sales remain range-bound with slight fluctuations in volume amid dull construction activities across the country.