Pakistan: Imported scrap prices remain largely stable w-o-w; weak steel demand amid monsoon

Pakistan's imported ferrous scrap prices have remained rangebound with a slight uptick of $1/tonne (t) w-o-w. Dull demand from end-users amid monsoons and weak construction activities have put pressure on rebar sales.

BigMint's assessment of European-origin shredded scrap was at $400/t, up by $1/t w-o-w.

Market comments

According to a buyer, workable levels for shredded scrap from the European Union (EU) were at $400/t, with offers at $405-408/t CFR, while UAE shredded scrap moved down to $412-415/t. Interest for both regions remained at $400/t. HMS 1 was offered to Pakistan at $385-390/t, but bids were at $378-380/t CFR. Workable levels in Pakistan were steady, though an improvement in demand is anticipated for the end of September, with potentially robust demand in October. Steel production percentages are still low, and financial issues continue to weigh on the market.

As per a UAE-origin supplier, the Turkish market has experienced a slight uptick, but China remains very weak, making the market highly unpredictable. Current weather condition in Pakistan is not favourable for steel consumption. In Pakistan, demand remains sluggish due to the monsoon and currency challenges. For UAE HMS(80:20), offers were at $375/t CFR Qasim, with bids around $370/t.

A major steelmaker pointed to a slight market rebound compared to UAE offers for UK shredded, though UK materials remain cheaper. However, some buyers are still grappling with financial issues related to obtaining letters of credit (LC), which have kept the market under pressure.

Another buyer shared with BigMint, "The market is significantly down due to the rainy season, leading steel mills to offer discounts and boost sales efforts."

In the past seven days, approximately 5,000-6,000 t of shredded scrap from the UK and UAE were booked at $395-415/t CFR Qasim.

Domestic market: Billet and rebar prices continued to decline and stood at PKR 205,000-210,000/t and PKR 244,000-246,000/t exw, respectively. Domestic scrap was priced at PKR 143,000-146,000/t exy, down by PKR 2,000-3,000/t. The spread between rebar and domestic scrap prices in Pakistan hovered at around PKR 100,000-105,000/t.

According to market feedback, steel mills are offering discounts on grade 60 rebars to boost sales.

Steel industry urges FBR to expedite GST relief on scrap: The documented steel industry is urging the Federal Board of Revenue (FBR) to quickly apply the sales tax exemption on local scrap from the 2024-25 budget. This move is expected to boost revenue by PKR 40-50 billion and tackle the issue of fraudulent invoices in the sector.

In a letter to the FBR Chairman, the Pakistan Association of Large Steel Producers highlighted that delays in implementing this policy are causing significant revenue losses and unhealthy competition. Many steel units are struggling or closing, leading to job cuts. The industry is calling for the FBR to act swiftly, streamline outdated processes, and enforce the exemption to stabilise the sector and achieve the anticipated revenue gains.

In another significant development, the Fauji Foundation (FF) has shown interest in acquiring Agha Steel Industries (AGHA) as part of its strategy to diversify into sectors such as construction, energy, and financial services. This acquisition aligns with FF's goal of achieving vertical integration in the steel industry, complementing its existing cement business. FF's expression of interest led to a 10.03% increase in Agha Steel's stock, pushing it to a seven-month high. The acquisition process will involve due diligence, regulatory approvals, and final agreements.

Outlook: The outlook for the imported scrap market remains bearish, particularly during the monsoon season. Imported scrap prices from UK are expected to stabilise at around $405-407/t. Domestic scrap buying is anticipated to improve as steelmakers look to restock for future production cycles. However, some mills will likely continue with production cuts due to the current market conditions.