Pakistan: Currency Depreciation May Result in Hike in Steel Prices

A recent price correction in global scrap markets and the possibility of depreciation of Pakistan Rupee against USD in near terms has turned scrap importers cautious before buying more volumes.

SteelMint’s assessment for Shredded scrap has moved down at around USD 335/MT, CFR Qasim, narrowing the range by USD 5-7/MT against last week’s report. While asking rates from the recyclers in UK and Europe is now being quoted at around USD 335-337/MT, CFR.

Pakistan scrap buyers booked decent volumes of containerized Shredded scrap last week as high as USD 340-342/MT, CFR Qasim levels but buying interest now stands not more than USD 335/MT, CFR in the market, shared a trade source.

However, offers for Middle East origin HMS 1 heard flat at around USD 330-333/MT, CFR and limited deals are being concluded at the moment.

Local steel prices inch up - Local steel market position remains more or less the same as last week. Market observed good demand for billet and rebar last week along with a shortage of readily available scrap inventories with steelmakers. Local steel prices slightly inched up while participants believe them to jump following currency depreciation and increased fuel prices in the near terms.

SteelMint’s assessment of local billet prices stand at PKR 80,000-80,500/MT (USD 570-573) ex-works. Rebar prices in Northern and Southern region reported at around PKR 97,000-98,000/MT and PKR 98,000-99,000/MT, ex-works respectively. While asking rates for steel bars G-60 being quoted at around PKR 99,000-100,000/MT, ex- Karachi inclusive of local taxes.

PKR continues depreciation against USD - Pakistan Rupee has now hit a record low of around 141 today continuing the depreciation against USD since last couple of weeks. Reports shared that in order to meet the IMF conditions for USD 12 Billion bailout package, the government may authorize the existing Monetary Policy Committee (MPC) or establish a high-powered institution to determine the new dollar-rupee exchange rate. The IMF had asked Pakistan to shift from the managed exchange rate to market-based flexible exchange rate.

Government raises prices of petroleum products sharply - According to reports, in the wake of a slight increase in the international crude price and currency devaluation, the government has increased the prices of petroleum products by up to PKR 6 per litre for the month of April. The government has already announced to gradually increase electricity and gas rates over the next few months. Participants added that this may affect domestic steel market prices further.

Inflation rate hits a record high in last five years - Pakistan’s Bureau of statistics recently reported that consumer prices influenced by faster rupee depreciation and rise in energy prices last month increased to their highest level in five years. Inflation measured through consumer price index (CPI) surged to 9.4% in Mar’19 while the average inflation during the July-March period rose by 6.79% on a yearly basis.