Pakistan: Imported scrap prices remain largely stable w-o-w amid sluggish steel sales

In Pakistan, the demand for imported scrap remained lacklustre, attributed to the year-end closing and sluggish steel sales in the domestic market. The prevailing liquidity issues and political unrest ahead of the upcoming elections in February further contributed to the subdued demand.

Approximately 4,000-5,000 t of shredded scraps were booked from Europe and Middle East origins during the week in the range of $425-435/t CFR Qasim.

Market sources report a sluggish pace with minimal activity. Shredded offers are currently unavailable, attributed to the recent Red Sea issue, causing a slowdown in the imported trading activities in the market.

Lastly, market offers from the Middle East region for shredded in containers were at $430-435/t, HMS sheared offers were at $405-410/t. Fabrication indicative ideas were at $415-420/t, and HMS (90:10) materials were offered at $395/t on a CFR Qasim basis.

SteelMint's European-origin shredded scrap assessment stood at $425/t, witnessing a slight decline of $2/t w-o-w.

Domestic market: In the domestic market, major steel mills reduced scrap prices by PKR 8,000/t ($28/t). The revised prices for rebar (grade 60) with effect from today stand at around PKR 259,000-259,500/t ($917-924/t) for 9.5/10 and 12mm, and PKR 257,000-257,500/t ($915-917/t) for 16mm and above.The local scrap prices were heard in the range of PKR 155,000-165,000/t, billets were heard at PKR 210,000-220,000/t exw.

Pakistan's domestic steelmakers have increased the prices of CRC and coated flat steel by PKR 5,000/t ($18/t), effective from 26 December, 2023. Before this, the mills had raised prices by PKR 7,000/t in mid-Nov'23. The factors behind the price increase are increased raw material cost and rising global steel prices.

The UNDP's recent report suggests parliamentary oversight of treasury operations and advocates for embracing open budgets and participating in the 'Open Government Partnership.' According to the report, Pakistan's options to resolve the debt crisis are limited, and it may continue relying on short-term measures and additional external borrowing. The report indicates that Pakistan's projected debt servicing for 2024-25 and 2025-26 is expected to be around $25 billion and $23 billion, respectively. It underscores the need for a working economy that attracts positive foreign currency inflows to achieve debt solvency.

The report emphasises the importance of fiscal transparency, accountability, and citizen engagement in public financial management. It also recommends tax reforms, strict budgetary controls, and compliance with the Public Finance Act to ensure fiscal responsibility. In the longer term, diversifying funding sources, promoting domestic savings, attracting foreign direct investment, and exploring public-private partnerships are crucial for reducing reliance on external borrowing.

Currency exchange: The Pakistani rupee (PKR) showed a slight improvement against the US dollar in the open market, with rates at PKR 283.75 for selling and 280.75 for buying. In the interbank market, the rupee was trading at PKR 282-283 against the dollar.

The Exchange Companies Association of Pakistan (ECAP) commended the State Bank of Pakistan's efforts for exchange rate stability and the announcement of a mechanism for calculating open market exchange rates.

The US dollar faced pressure in global markets amid signs of cooling inflation, leading to expectations of a potential interest rate cut by the Federal Reserve next year.

IMF meeting: The market is anticipating the International Monetary Fund (IMF) executive board meeting on 11 January, where a decision will be made regarding the release of the next tranche of $700 million to Pakistan under the ongoing $3 billion Stand-by Arrangement.

Outlook: The current market outlook is deemed unpredictable, and a clearer picture is anticipated after the conclusion of EU holidays. If the existing low demand persists in both the steel and scrap markets until the end of the month, imported scrap offers will likely continue to remain sluggish.