Pakistan: Imported scrap trade slows down as bid-offer gap widens

• PKR depreciates to all-time low against USD
• Leading recyclers lift shredded scrap offers
• Distress cargo sales put prices under pressure
• Trading likely to slow down ahead of Ramadan 

Pakistan’s scrap import market is yet to see any major improvement despite it being a week away from the holy month of Ramadan starting 3 Apr’22. The widening price gap between bids and offers has kept the steel mills away from making bulk bookings.

SteelMint’s assessment for shredded scrap import prices into Pakistan stands at $642/t CFR, mostly stable w-o-w.

Recent offers & deals

• Around 2,000 tonnes (t) of UK/EU-origin shredded scrap in containers were booked at $635-640/t CFR Qasim recently.
• Offers for shredded scrap from major recyclers are being quoted at around $660/t CFR levels for May shipments, while some distressed cargoes are available at $635/t CFR.
• HMS 1 offers from the UAE are now at $620-625 /t CFR Qasim; no firm deals were reported.

Currency devaluation, which has increased almost all costs, and the liquidity issue during the last 10 days of the billing period has affected the market. A few sources consider domestic scrap more viable compared with imports.

Factors behind subdued sentiments:

• PKR crosses 180-mark against dollar: The downtrend in the national currency persisted this week and the PKR fell to an all-time low of 180.07 against the USD owing to expectations of an unsustainable current account deficit, according to media reports. Currently, the PKR is being traded at 181.5 against the USD.

• Liquidity issues: Pending electricity and other bills are required to be paid in the last 10 days of every month. Hence, major steel mills face liquidity issues.
• Political instability: The Joint Action Committee (JAC) of the media has challenged the Prime Minister to prove his “scandalous allegations” that media houses have been bought by political parties and some are being funded by foreign sources. Imran Khan made these allegations in his public address in Malakand on Sunday. The Pakistan Federal Union of Journalists (PFUJ) sought an apology from the PM over the allegation that media houses were receiving funds for “anti-government campaigns”.
• Steel trade improves but not significantly – Construction activities have slowed down, mainly the government projects, as builders and developers suspended public infrastructure work due to a steep surge in the cost of construction material. Domestic rebar offers for G-60 (10-12mm) grade are at PKR 208,500- 209,000/t exw Punjab ($1,150-1,153/t), including taxes. However, workable prices are at PKR 200,000-202,000/t exw ($1,103-1,114/t). Increased sales tax at 17% instead of 14% has negatively affected cash flows.

Ferrous scrap imports rise marginally in Feb: Pakistan recorded a marginal rise of 3% on-month in seaborne bookings for Feb. Imports stood at 0.35 mnt in Feb as against 0.34 mnt in Jan, as per customs data. On a y-o-y basis, import volumes declined by 8% from 0.38 mnt in Feb’21.

Outlook: Slow domestic demand continues to remain as the persistent downside for imported scrap prices. Buyers and steelmakers are playing safe and are preferring hand-to-mouth bookings.