Pakistan: Budget FY’26 provides relief on scrap import duties, revises steel import norms

• Customs duty on melting scrap grades cut to 0%
• 5% customs duty imposed on re-rollable scrap

Pakistan’s FY’26 budget has provided significant relief for steel raw material importers, with most ferrous scrap grades now exempt from customs duty. Additionally, the customs duty on billets has been halved, significantly reducing sourcing costs.

Melting scrap now at 0% customs duty

Melting scrap, including HMS, shredded, and bundled, are now fully exempt from customs duty. This includes the removal of the previous 3% customs duty on HMS, offering direct cost savings for steelmakers. Additionally, the 2% additional customs duty (ACD) on raw materials and scrap imports has also been removed, further reducing procurement costs.

However, re-rollable scrap has been hit with a 5% customs duty, alongside stricter limits on the permissible percentage of non-mutilated material per lot.

These steps are intended to tighten classification norms and reduce misuse under lower-duty categories. The regulatory duty (RD) is proposed to be reduced from 15% to 10%, although final confirmation on implementation is still awaited, keeping the market cautiously observant.

Customs duty on billet imports reduced to 5%

Meanwhile, customs duty on billet imports has been reduced from 11% to 5%, which could encourage higher inflows in the coming months, especially as local billet production costs remain elevated.

As per BigMint data,

• Pakistan imported 1.02 million tonnes (mnt) of ferrous scrap in January-April 2025, up 12% y-o-y from 0.91 mnt in the same period last year.
• Meanwhile, semi-finished steel imports remained negligible in the past three quarters, largely due to high customs duties and a price-sensitive domestic market.

Market reaction, expectations

“With customs duties reduced on billets, we may now see a shift from scrap imports to billet imports, which could potentially dampen domestic steel production,” a mill-side source observed.

Importers are cautiously optimistic. While scrap demand is expected to rise, especially for HMS, traders may attempt to reclassify re-rollable scrap as HMS to avoid the 5% customs duty. On the semi-finished import side, the cut in billet duty could revive import interest, particularly with domestic production costs remaining high.

That said, buyers are holding back until RD/ACD structures are finalised. Further clarity is expected by the end of June.