Pakistan: Imported scrap trade remains slow, preference to local scrap increases

Pakistan's imported scrap market witnessed slow trading activities amidst reduced working hours during Ramadan, steep currency depreciation and political instability. Fresh imported shredded scrap offers from UK suppliers are at $660/t CFR Port Qasim levels, mostly unchanged w-o-w. However, deals are yet to take place at these levels. The last deal heard was for 2,000 t of UK origin shredded at $650/t CFR levels, earlier this week.

Mills prefer local scrap to meet urgent requirements

Buyers and steel mills are focussing on domestic scrap purchases on cost-effectiveness. Also, mills have lowered steel production as demand is low during Ramadan. The gap between domestic and imported scrap prices has widened to around PKR 10,000/t ($50/t).

Local shredded scrap is available at around PKR 130,000/t exy Punjab ($701/t) levels. However, if we remove sales tax etc., domestic scrap is cost-effective than imported scrap by nearly PKR 10,000/t ($50).

Factors leading to dull sentiments in the imported scrap market-

• PKR plummets to an all-time low: The Pakistani rupee plummeted to an all-time low against the US dollar. Currently, PKR is trading at 184.86 against the dollar in the currency exchange market during intraday trading, up 2.37 from 182.49 a week ago.
  
  
• Political issue yet to resolve: Pakistan Prime Minister Imran Khan blocked a no-confidence vote and advised the president to order fresh elections, fuelling anger among the opposition and deepening the country's political crisis. The Supreme Court adjourned the hearing into a suo-moto notice over ruling from Dy Speaker Qasim Suri against a no-confidence motion till 5 April. He proposed former CJP Justice (R) Gulzar Ahmed as caretaker Prime Minister.
  
  
• Ramadan holidays: As Ramadan holidays started, most of the mills' operational time have reduced, which may reduce scrap and steel trade activities.
  
  

Hike in scrap prices may support rebar prices

The domestic steel market is slow due to ongoing Ramadan. Also, there is limited demand in the market. Rebar prices are mostly unchanged w-o-w, but market players believe that rebar prices may come down if the situation remains the same. In contrast, if there is any hike in scrap prices then rebar offers are likely to go up, SteelMint learnt from market sources.

"The market is under pressure for another rate hike. At the current increased imported scrap prices, domestic price should be at PKR 240,000/t exw levels", said a major steel producer.

Pakistan's domestic leading steel mills kept rebar prices unchanged for G-60 (10-12mm) grade at PKR 216,000/t exw-Punjab ($1,184/t), including taxes. However, workable prices are at PKR 200,000-204,000/t exw ($1,095-1,117/t).

Pakistan domestic prices

Outlook: Considering the current market situation, mills have changed their preference towards domestic material. However, availability of the same is limited, hence, mills cannot rely totally on domestic sourcing. At this situation, mills would have to resume import bookings in the near term.