Pakistan: Steel mills resume bulk scrap bookings after a two-year gap

With a sharp fall in global scrap prices and drop in bulk freight rates, Pakistan mills have raised inquiries for bulk cargoes. According to market sources, a few major mills have collectively booked a bulk scrap cargo from the United Kingdom recently. The cargo entirely comprised 35,000 t of shredded material was booked at $475-480/t CFR Qasim basis.

Notably, bulk bookings have regained momentum after a gap of two years as the last round of bookings was seen in March 2020.

On the other hand, containerised scrap market continues to remain slow with buyers holding back purchases amidst the steep drop in Turkey prices seen recently. SteelMint’s assessment for imported containerised shredded material stood at $485/t CFR levels, registering a significant drop of $35/t w-o-w.

Deals for 1,500 t of shredded material was recorded in the range of $480-490/t CFR levels.

Factors driving market sentiments-

• Turkey’s imported scrap prices fall: Turkey’s imported ferrous scrap prices fell further by $5-10/t after the recent deals heard, as per sources. Europe-origin bulk mixed cargo comprising HMS 1&2 (80:20) and shredded was booked at $370/t and $380/t CFR respectively. However, deal remained unconfirmed till the time of publishing this report. SteelMint assesment for USA-origin HMS 1&2 (80:20) now stands at $385/t CFR levels. This may encourage other scrap-buying countries like Pakistan to make purchases.
• PKR weakens against dollar: Pakistani rupee (PKR) has hit 205 against US dollar in the currency exchange market. Pakistan is a consumption-based economy and it imports essential commodities for the manufacturing industry. The persistent inflation will further erode the value of the domestic currency. However, it will create a scope for export-based production and may lay the floor plan for increasing the productivity and competitiveness of Pakistan as imports become unaffordable.
• Hike in power tariffs: The National Electric Power Regulatory Authority (NEPRA) has increased power tariffs by PKR 3.99 per unit on account of fuel cost adjustment (FCA) for April 2022 and issued a notification to this effect.
• Limited changes in duty structure in budget: While making no change in the duty structure about imported scrap, the government retained the existing tariff structure, which is based on a cascading principle, i.e., lower duty rates on raw materials and higher duty rates on finished products.
• Major mills raise rebar offers by up to PKR 7,000/t ($34/t): Major steel mills in Pakistan like Mughal Steel, Agha Steel, Amreli Steels, and Ittehad Steel have hiked rebar offers by PKR 6,000-7,000/t ($29-34/t) compared to the beginning of last week, sources confirmed. Offers for G-60 rebar (10-12mm) are at PKR 228,000-231,000/t exw-Punjab ($1,110-1,125/t) including taxes. However, the workable prices are still lower by PKR 5,000-8,000/t ($24-38/t). Prices escalated due to the continuous and unprecedented increase in energy costs, devaluation of the Pakistani rupee and rising input costs.