Pakistan: Imported scrap market stagnant amid dull steel demand

Pakistan’s imported scrap market remained stagnant in the last couple of weeks on limited demand, SteelMint learnt from sources. Subdued finished steel demand, high rebar inventory piling up at mills and slow drawdown of scrap inventories impacted scrap imports.

Fresh offers are at $470-475/tonne (t) CFR, moving down by $10-15/t. However, a limited quantity was heard booked at these levels.

Reasons behind dull demand –

• Mills curtail production:  The market remains quiet this week, with a few mills either suspending their operations or curtailing production. Meanwhile, steel mills are struggling with liquidity issues and are opting to wait for further clarity on market trends, SteelMint understands.

Amreli Steels Limited, Pakistan’s one of the leading steel producers, has decided to shut down all its plants for 20 days, as per notice released by the company. The company has suspended production operations from 31 Aug to 19 Sept’22 owing to sluggish demand for finished steel products due to heavy rainfall and flood situations across the nation.

• PKR drops further against the USD: The Pakistani rupee slid further in the beginning of this week. The rupee’s movement in the open market also grabbed attention as the spread narrowed with rates in the inter-bank. Currently, the rupee is being traded at 222.4 against the dollar.
• Limited demand weighs down rebar offers: Limited domestic rebar demand weighs on offers. Offers for G-60 rebar (10-12mm) are at PKR 218,000-220,000/t exw-Punjab, including taxes. However, the tradable value is lower by PKR 5,000/t ($22/t) exw, depending on payment terms. Heavy rains and floods have slowed down steel consumption.

Additionally, the piling up of finished steel inventory is creating liquidity issues in the absence of demand. Hence, to secure maximum profits, mills lowered rebar prices.

• Flood situation yet to improve: Pakistan is amongst the top five countries affected by climate change making it vulnerable to natural disasters. Natural disasters have impacted Pakistan’s economic wellbeing. However, the prevalent situation due to the floods is unprecedented, inflicting huge losses on businesses including the steel industry.

Outlook: Industry participants believe that the market is likely to improve in the near term, which is expected to be a  favourable season for construction activities.