Pakistan’s imported scrap market remained more or less firm for yet another week, although negative sentiments prevailed. Floods and heavy rainfall in Karachi and Lahore impacted market activities severely. Transportation through all modes (rail and road) remained out of bounds.
“The market is totally silent. Imported scrap material which was booked two months ago has arrived at port, but due to transportation issues people are unable to get it delivered at their plant,” said a scrap trader.
Buyers are waiting for further price correction so that they can book material for November deliveries at low prices. Meanwhile, a few mills and buyers stepped back from booking fresh slots and are waiting for clarity in prices. The already piled up inventory and low demand for finished steel turned the mills cautious.
Fresh offers for UK origin shredded scrap are at $445-450/tonne (t) CFR, moving down by $20/t. Interestingly, prices have declined over $50/t in last one month.
Factors impacting market sentiments
- PKR continues to dip: The Pakistani rupee (PKR) depreciated against the US dollar in the currency exchange market. The local currency closed at 231.7per dollar. The local currency’s decline can be attributed to several factors including an increased import bill due to floods, and friendly countries backtracking on their promise to loan Pakistan money once it had received a loan from the International Monetary Fund (IMF).
- Power tariff increases again: The National Electric Power Regulatory Authority (NEPRA) notified a PKR 4.34 per unit increase in electricity prices under the head Fuel Charges Adjustment (FCA) of July 2022, according to a notification dated September 12.
- Flood crisis to hit GDP growth projection: The country expects to cut its Gross Domestic Product (GDP) growth projection for the financial year 2022-2023 from 5% to 3% due to losses from the monsoon rains and floods, Planning Minister Ahsan Iqbal said, as per reports.
- Rebar prices under pressure: Limited domestic rebar demand and the increased cost of production have kept rebar prices under pressure. 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.
Pakistan’s domestic prices
Most of the metropolitan and mega projects are on hold due to the flood situation, with the government earmarking development funds for flood relief activities, SteelMint learnt from sources.
“Looking at the current situation and increased production cost, mills may increase their rebar offers, however response from end users is still below expectations”, said a steel producer.
Outlook: Imported scrap prices are likely to fall further on limited demand from end users and lack of supportive market sentiments. On the other hand, liquidity crunch has kept market activities sluggish.
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