Pakistan: Imported ferrous scrap prices hold steady w-o-w; Finished steel prices drop amid PKR appreciation

Pakistan’s imported scrap prices hovered around $412-415/tonne (t) CFR, largely stable w-o-w amid limited activities. From the buyers’ side, bids were below $412/t, whereas offers for high-grade shredded materials were heard at $416-418/t on a CFR Qasim basis. During the last week, deals were heard in the range of $407-415/t for shipments of 3,000-4,000 t of shredded scrap from Europe, with some deals remaining unconfirmed.

Currently, not many procurements happening, and as per market participants, if interest rates come down due to expected improvement in inflation, demand may improve.

A major mill source from Pakistan said: “The market has slowed down significantly, primarily due to the continuous depreciation of the dollar, with a daily decline of PKR 1 or more. As a result, buyers have become less active.”

Domestic market: The domestic steel scrap market has not performed well throughout this week as per market participants. Local scrap offers were assessed at PKR 165,000-170,000/t ($589-606/t), rebars at PKR 265,000-270,000/t ($945-963/t), and billets at PKR 225,000-228,000/t ($802-813/t). As per recent market updates, major steel mills like Agha, Mughal, Naveena, and Amreli have slashed their rebar prices by PKR 10,000-12,000/t recently due to the PKR appreciation.

The effective price stood at PKR 268,000-270,000/t for 16 to 32 mm sizes, while PKR 270,000-272,000/t for 10 to 12 mm. However, in the trade market, workable levels for rebar were heard at PKR 265,000-268,000/t. Billets were heard at PKR 220,000-225,000/t and local scrap was assessed at PKR 150,000/t on a cash basis.

Currency exchange rates: In the open market on Tuesday, the Pakistani rupee continued its upward trend against the US dollar. It was quoted at PKR 280 for selling and PKR 277 for buying.

In the interbank market, the rates were PKR 280.5 for selling and PKR 277.5 for buying, as per data from the Exchange Companies Association of Pakistan (ECAP). These rates are lower than those in the interbank market.

This appreciation follows the State Bank of Pakistan’s (SBP) efforts to control the rise of the US dollar. Last month, the SBP announced a list of “structural reforms” targeting Exchange Companies (ECs).

Power tariffs: The National Electric Power Regulatory Authority (NEPRA) has granted approval for an electricity price increase of PKR 1.71 per unit, attributed to Fuel Charges Adjustment (FCA) for August 2023. NEPRA has issued an official notification confirming this adjustment.

The approved tariff increase, falling under the FCA category for August 2023, will be itemized separately on consumers’ electricity bills. The financial impact of this rate adjustment will be noticeable in consumers’ bills for October 2023.

It’s important to note that this increase will not affect Lifeline and K-Electric customers. Sources indicate that the August FCA will impose an additional financial burden of approximately PKR 31 billion on consumers of power distribution companies (DISCOs). This tariff surge is expected to impact all consumer categories.

Outlook: Imported ferrous scrap market activities are expected to go down further as the sudden hostilities in the Middle East may impact energy markets and disrupt major scrap supply towards Pakistan if that situation continues for too long or gets out of control.