Pakistan: Steel mills knock govt door for LC openings; imported scrap prices rise

Pakistani steel manufacturers are pleading with the government to extend help by providing letters of credit (LCs) for scrap imports despite steel mills operating at 35-40% capacity utilisation levels.

Mills have no option but to hike steel prices amid acute liquidity crunch resulting in finished steel selling pressure. Mills are required to pay electricity bills that are due from the last 8-10 days.

The nation has limited foreign reserves and government projects remain stalled, with negligible construction activities being reported from the major provinces.

Current deals for deformed grade 60 rebar (10-12 mm) have been heard at PKR 290,000-295,000/t exw ($1,105-1,124/t) including taxes. However, a few mills are offering rebar at around PKR 300,000-301,000/t effective 21 February, including substantial discounts.

Mughal Steel increased rebar offerings by PKR 5,000/t ($19/t) to PKR 306,000/t in some areas of the country's north as on 20 February. Due to lack of raw materials and in consideration of the nation's current economic situation, mills have raised prices.

Fresh offers for local scrap are at PKR 194,000-196,000/t($739-747/t) exy-Punjab.

PKR against USD

The Pakistani rupee (PKR) has depreciated fast and there are fears that dollar crunch might further erode its value. Due to currency fluctuation, the Pakistani government has prohibited all imports with the exception of medicines and other necessary items.

Currently, the Pakistani rupee is being traded at 262.3 against the dollar, up from PKR 266.50 last week.

Zero scrap imports

The nation's scrap importers have been adversely impacted by delayed LC opening and rising inflation.

A steel mill source said, "Limited availability of local and imported scrap has already resulted in the closure of small- and medium-sized mills."

SteelMint's assessment for imported shredded scrap in containers is at $470/t CFR, up $5-10/t w-o-w.