Pakistan: Imported scrap trade slows down on rising steel inventories with mills

Pakistan’s imported scrap market maintained silence for yet another week. Trade slowed down due to the limited cash availability, and an uncertain political situation, and the unstable currency kept steel mills and buyers sidelined. 

Due to already piled-up finished steel inventory, mills were selling at a lower price to maintain the cash flow. Many construction projects are also on hold due to limited fund releases from the government.

Fresh offers for UK-origin shredded scrap in containers are at $455/tonne (t) CFR, unchanged w-o-w. Buyers bid at $450/t but not many deals were heard to have been concluded.

Negative market sentiments

• Rupee remains under pressure: The PKR continued to struggle and incurred losses after gaining value in the last two weeks. Currently, the PKR is being traded at 219.6 against 217.3 seen last week.
• Mills lower rebar offers further: Pakistan’s major mills continued to lower their rebar offers. Currently, offers for G-60 (10-12 mm) are at PKR 210,000/t exw Punjab ($956.7/t), including taxes, down by PKR 5,000/t w-o-w. However, tradable prices remained at PKR 5,000/t – lower than the offered price, depending on payment terms.

Pakistan domestic prices

Mills are already filled with high rebar inventory, and prices are under pressure due to limited demand from end-users. Hence, steelmakers are likely to lower rebar prices further.  

• Mills suspend production: Many steel mills in Karachi and Punjab regions have planned to suspend their production and closed for a while due to sluggish demand in the finished steel market. Additionally, a prominent Gujranwala steel market is also closed since last week. “Due to dull demand from end-users, the market is uncertain about when to resume trade activities,” said a steelmaker. 
• Four-wheeler sales decline sharply: Pakistan’s automotive sales have seen a drastic fall in September. Passenger car sales recorded only 9,213 units, declining significantly by 51% y-o-y in September 2022 as compared to 18,971 in September 2022 as per data released by the Pakistan Automotive Manufacturers Association (PAMA).

The sales reduction throughout September comes despite most automotive manufacturers having revised their prices downwards to correct for the rupee’s gains, whilst the rupee also stabilized relative to the previous months.

Outlook: Steel mills are likely to postpone their fresh scrap bookings and opt for a wait -and-watch mode for clearer market direction. However, the domestic market is still unsupportive.