Pakistan: Imported scrap prices climb to a two-month high on global rally

• Imported scrap prices up $20/t w-o-w
• Major mills like Mughal Steel, Agha Steel lower rebar offers as PKR appreciates against US dollar

Pakistan’s steel market saw trade activities resuming after the Muharram/Ashura holidays last week. Although imported scrap trade was less active, offers increased sharply compared to last week on global price rally.

SteelMint’s assessment for shredded 211 scrap in containers from UK/Europe stood at $500/t CFR Qasim, up sharply by $20-25/t against last week’s opening. Prices have climbed to a two-month high as the similar levels were seen in June.

Meanwhile, mills have old inventories in hand at present. Limited demand from end-users and heavy rainfall in many parts of the county have resulted in increase in inventories.

“Steel mills are not keen to buy fresh slots due to less selling pressure of finished steel amid liquidity crunch,” said a Pakistan-based scrap buyer.

Pakistan’s domestic market overview

• Rebar prices correct on lower offers from mills: Already piled up finished steel stock and the continuous appreciation in the national currency from the last couple of weeks resulted in a price cut by PKR 7,000-10,000/t ($32-47/t) by domestic rebar producers. This is the first price cut by mills after the two-month continuous price hike from June. Current offers for G-60 rebar (10-12mm) of Agha Steel are at PKR 233,000/t exw-Punjab ($1,090/t) including taxes.

Offers for G-60 rebar (10-12mm) are at PKR 225,000/t exw-Punjab ($1,050/t), including taxes. However, the tradable value is lower by PKR 8,000-10,000/t exw, depending on payment terms.

Pakistan domestic prices

• PKR rebounds further against dollar: The Pakistani rupee (PKR) bounced back against the US dollar (USD) after plunging to a record low in late July. The national currency is being traded at 213.7 in the currency exchange market. Pakistan has a consumption-based economy and relies on imports of commodities including steel and scraps for its manufacturing industry. Hence, appreciation of PKR is likely to improve trade activities.
• Pakistan’s monetary policy to shut down mills: Pakistan Association of Large Steel Producers (PALSP) notes in a recent press release, that it is impossible for any businesses to plan expansions or working capital with such abrupt changes. The key interest rate currently stands at 15%, which is the highest since the last two decades last seen in April 1999. The interest rates doubled in only 8 months.

Industries are facing problems as banks are not opening LCs for raw materials. The steel industry is one of the largest revenue-generating sectors of the country and due to worsening economic conditions, it is already facing a severe liquidity crunch, while many small to mid-sized mills have been already shut down.

Outlook: Participants expect that this month, trade in the imported market is likely to remain slow. Meanwhile, steel mills may further lower rebar prices next week so that the maximum inventory can be sold to facilitate monthly payments.