Inquiries for import scrap from customers in Pakistan have been increasing over the past week given the necessity to replenish stocks, coupled with increased flexibility of Pakistani banks as regards issuing letters of credit (LCs), though “it’s still very expensive,” according to sources. Prices have remained mainly stable or have been slightly higher in new deals, with most market insiders expecting further price hikes in the short run. At the same time, according to sources, the recent surge in power rates will further inflate the production costs of Pakistani steelmakers, leading to an inevitable increase in steel prices.
Accordingly, following several deals for ex-UK/EU shredded scrap in containers signed at $417-418/mt CFR on Friday, August 4, more deals are reported to have been signed during the weekend and at the beginning of this week at $414-419/mt CFR. “We estimate around 8,000 mt in total have been booked since the weekend in Pakistan,” a Pakistani trader told SteelOrbis, Besides, according to sources, several deals for around 3,000 mt in total have already been done at around $420/mt CFR by Wednesday, August 9. Offers for ex-UK/EU shredded scrap have been voiced at $418-423/mt CFR, mainly the same as at the end of last week and up by $8-10/mt week on week.
At the same time, despite some higher business activity, Pakistan’s steel industry is facing a crisis as soaring electricity and petrol prices threaten to wipe out its profits, escalate production costs, and also push the industry to the brink of closure, jeopardizing millions of jobs. Over the past year, electricity prices have surged by over 78 percent, from PKR 28/unit including taxes in June 2022 to approximately PKR 50/unit including taxes in July this year. Thus, as one of the major power consumers, the steel industry will be burdened by the rapid increase in electricity costs, which account for nearly 50 percent of the total production expenses.
According to Wajid Bukhari, secretary general of the Pakistan Association of Large Steel Producers (PALSP), the increase in steel prices is expected to reach PKR 8,000-10,000/mt ($28-35/mt), and, when combined with the impact of financial charges, transportation costs, and currency depreciation, the overall rise in steel prices may range from PKR 15,000 ($52/mt) to PKR 18,000/mt ($63/mt).
In the local market, most offers for scrap equivalent to shredded have been voiced at PKR 172,000/mt ($597/mt) ex-warehouse Karachi and at PKR 177,000/mt ($615/mt) ex-warehouse in Punjab.
All prices on Pakistani rupee basis include 18 percent VAT.
$1 = PKR 287.90