Pakistan: Imported scrap prices rise by $8/t w-o-w on restocking demand

• Low capacity utilisation, limited projects affect mill operations
  
  
• Policy rate cut expected to ease liquidity pressure
  
  

Shredded scrap from the UK/Europe was offered at $390-395/t CFR, marking a $7-8/t increase w-o-w. Some bookings were heard at $388-390/t, with bids received at varying levels. Sales were sporadic, with buyers opting for selective restocking where essential, but overall, scrap imports remained less viable due to thin margins.

Commercial Bala prices held steady, while rebar prices remained stable amid fair sales activity and a generally positive outlook for January. However, concerns arose over a possible deterioration in the law and order situation, which could impact future market sentiment.

A Karachi-based mill owner commented, "We are operating at just 40% capacity. Sales remain sluggish as there are no active projects or construction activity to drive demand. With no buyers in sight, it is becoming increasingly difficult to sustain operations." He further noted that "many mills have already shut down, and those still running are on the verge of closure due to heavy losses as fixed costs remain uncompensated."

Regarding scrap prices, he observed, "Shredded scrap is being offered at $395-398/t CFR Qasim from the UAE, while shredded from the UK hovers around $392-395/t. But given the dire market conditions, even these price levels are difficult to justify for mills operating at such reduced capacity."

A Sindh-based market participant commented, "Although material flow is slow, workable levels are still achievable at around $392-394/t for shredded scrap. We saw recent deals of around 4,000 t of UK/EU shredded concluded at $390/t CFR Qasim, indicating some upward price movement in the market."

He added, "HMS and PNS mix is being offered at $400-405/t, but buyer interest remains low due to limited financial capacity and cautious market sentiment. Local scrap is priced at PKR 140,000-143,000/t ($504-515/t), while imported shredded is workable at $387-388/t."

On the finished steel segment, he noted, "Rebar prices are hovering around PKR 240,000-243,000/t ($865-875/t), while billet is at PKR 208,000-210,000/t ($749-756/t). Prices have seen a slight uptick, driven by improving sentiment before year-end, but inquiries remain limited."

On the policy front, the State Bank of Pakistan (SBP) has reduced its key policy rate by 200 basis points (bps), bringing it down to 13% from 15%. This decision aims to support economic recovery amid calls from businesses for a larger cut of 400-500 bps. While the reduction falls within the 200-300 bps range predicted by financial analysts, it is expected to ease liquidity pressures, stimulate trade, and help the broader economy in early 2025. Industry participants are closely watching how this move might affect steel demand and overall market activity in the coming months.

Outlook: The outlook for Pakistan's scrap and steel market indicates heightened inquiries as the supply side is set to remain closed until the first week of January 2025. This anticipated supply gap is expected to create a surge in demand, potentially supporting price stability or upward movement in the near term.