Pakistan: Imported scrap prices rebound as mills resume bookings amid lower inventory

Pakistan’s imported scrap market has regained the momentum with mills resuming bookings amid a fall in inventories and surrounding the hike in domestic scrap prices. However, the currency depreciation continued to be a key factor governing imported scrap bookings.

Offers for shredded scrap in containers from UK/Europe are at $525-535/t CFR Qasim levels, while buyers were bidding at $520/t CFR levels. Around 5,000-8,000 t of shredded was booked at $515-520/t CFR levels in the last couple of days, SteelMint learned.

“Buyers and steelmakers are likely to return to the market as not many transactions have happened in the previous month which created a scrap shortage,” said a reliable source. Meanwhile, before the advent of the monsoon season, mills should restock inventory, he added.

Factors driving imported scrap market sentiments –

• Rupee continues to trade low against $: The Pakistan rupee hit fresh lows against the US dollar in the currency exchange market in the recent days. Currently, the currency is traded at 198.7 against $.
• Revised electricity tariff: The Pakistan government has revised its power tariff and is likely to increase the same as the Central Power Purchasing Agency (CPPA) has sought PKR 4.5 per unit hike. National Electric Power Regulatory Authority’s (NEPRA) hearing on the application of the CPPA is scheduled to be held on 31 May. This may create pressure on steel mills and prices of construction material may get costlier.
• Local scrap prices shoot up: Local scrap prices have strengthened due to scrap shortage in the domestic market. Prices have shot up by around PKR 5,000/t w-o-w. Domestic scrap (equivalent to shredded) is now available at PKR 125,000-128,000/t exy ($630-645/t) levels. This has created a panic situation among the market participants.

Finished steel market yet to improve: Finished steel sales in the domestic market is yet to improve. Moreover the upcoming monsoon season will likely keep the construction activities slow. However, mills are eyeing a hike in rebar offers in the first week of June. Current tradable prices are at PKR 200,000-203,000/t exw ($993-1,008/t).

Pakistan domestic prices

Outlook: Imported scrap prices are likely to remain supportive in the near term as suppliers may not significantly lower offers on indications of prices firming up.