Pakistan: Imported scrap trade dull on bearish steel market sentiments

• Imported scrap offers down $10/t w-o-w
• Domestic steel prices are likely to fall further 
• Pakistan’s ferrous scrap imports fall over 20% in July

The imported scrap market was mostly quiet over the past week. The continuous volatility in currency exchange rates kept buyers cautious. Heavy rainfall and a weak finished steel market kept buying enquiries on the lower side.

Moreover, industry participants are trying to sustain in the market, while a few small Punjab-, Lahore- and Islamabad-based mills have shut down or curtailed production for the time being.

SteelMint’s assessment for shredded 211 scrap in containers from UK/Europe stood at $490-495/t CFR Qasim, down by $10/t against last week’s opening when prices had climbed to a two-month high.

“Recent deals in containers for 3,000 t of UK-origin shredded scrap have been concluded at $490/t CFR Qasim, whereas a subdued domestic market kept buyers sidelined”, sources informed SteelMint.

Ferrous scrap imports drop in July: Pakistan, South Asia’s major ferrous scrap buyer, imported 173,348 t in July as against 223,819 t in June. Seaborne bookings for July shipments decreased by 23% m-o-m. Similarly, on a y-o-y basis, scrap imports fell by 30% compared to 246,169 t in July last year.

Market movers

• PKR depreciates again: The Pakistani rupee (PKR) kept falling against the US dollar (USD) after gaining somewhat last week at 213 levels. The national currency is now being traded at 216.6 in the currency exchange market.
• Rebar market unsupported: Bad weather and spells of heavy rain in the Punjab and Karachi regions affected the market and slowed down construction activities. Offers for G-60 rebar (10-12mm) are at PKR 220,000- 225,000/t exw-Punjab ($1,013-1,036/t), including taxes. However, the tradable value is lower by PKR 5,000-8,000/t ($23-36/t) exw, depending on payment terms.

Pakistan domestic prices

• Liquidity issue during month-end: Pending electricity bills and other due payments are required to be paid in the last 10 days of every month. Hence, major steel mills are facing liquidity issues. The market is likely to regain momentum from September.
• Impact of heavy rainfall: The domestic steel market observed weak demand throughout the month due to heavy rainfall all over Pakistan and also due to Muharram. However, a few major steelmakers decreased their rates to capture the maximum market share.
• Power prices likely to go up: Electricity tariffs are likely to go up once again as the Central Power Purchasing Agency (CPPA) has filed an application with National Electric Power Regulatory Authority (NEPRA) seeking a power tariff increase by PKR 4.69 per unit, as per reports. NEPRA will conduct a hearing in this regard on 31 August. Once approved, the increase will put an additional burden on the steel industry and domestic users.

Outlook: Buyers and steelmakers are likely to hold fresh bookings for the time being and opt to wait for the next round of Turkish bookings for a clearer price direction. However, currency stability may improve trade activities.