Highlights of the Week

Global steel prices are experiencing some stability as a slowdown in production has led it to regain the demand-supply balance in many regions. In the ship recycling market, a prolonged period of dull buying activity has created an appetite among the recyclers to secure tonnage for their emptying yards, however, with the ongoing issues such as depleting forex reserves, LC restrictions and slowdown in demand, they are not able to offer attractive price levels which can spur activity in the recycling sector. With every geopolitical decision creating new trade diversions, ocean freight rates are expected to maintain firm levels for the foreseeable future.

Temperatures in Europe are climbing again as another heat wave sweeps the continent, threatening to disrupt travel and business and ratcheting up pressure on the region’s strained power infrastructure. The Rhine — a pillar of the German, Dutch and Swiss economies for centuries is set to become virtually impassable at a key way point, hindering vast flows of diesel and coal. The Danube, which snakes its way 1,800 miles through central Europe to the Black Sea, is gummed up too, hampering grain and other trade.

EU embargo on the import of Russian coal have come into force from August 11 despite widespread concerns of a looming energy crisis hitting the 27-member bloc this winter. EU members agreed to the ban in April as part of the bloc's fifth package of sanctions against Moscow after the out break of the Russia-Ukraine conflict on Feb 24. All industries are trying to stockpile ahead of winter and cut their gas reliance before gas supplies from Russia are further compromised.

Runaway inflation took a breather in July, with consumer prices increasing by 8.5% year over year, a slower pace than the 9.1% increase in June, fueling hopes that inflation has peaked. Expectations that the Fed will yet again raise its benchmark interest rate by 75 basis points at its next monetary policy making meeting have fallen since Wednesday's inflation data came out. More analysts now expect the central bank to raise rates by 50 basis points.

Market sentiments remain stable

The offer prices from recyclers of India are improving week-on-week backed by stable domestic demand for steel. There is a keen buying interest for small-sized tonnage in the market and end buyers are bidding competitively with their neighboring counterparts to secure tonnage.

In spite of subdued trading, India's HRC export index rises by about USD 15/MT due to rise in Chinese prices and supply constraints.

India turned net steel importer in July as exports plunged to a three-year low, weighed down by the 15% export tax.

India is likely to be the fastest-growing Asian economy in the Asian region in 2022-23, according to analysts at Morgan Stanley, who expect the GDP growth to average 7% during this period – the strongest among the largest economies. The Indian economy, they said, is set for its best run in over a decade, as pent-up demand is being unleashed.

Higher energy cost draining Forex reserves

Bangladesh continues to reel under pressure due to factors such as currency devaluation, power cost-push, LC-related issues and weak steel demand. The end buyers are hunting the market for small-sized tonnage at discounted price to meet their inventory needs.

Several protests erupted in Bangladesh this week after government announced a 51.7% hike in petrol and diesel prices. The price hike, undoubtedly the highest since independence, will cause further inflation, creating pressure on the economy, but the energy ministry had no option but to push for a rise in prices due to a crunch in foreign currency reserves and high prices in global markets.

Bangladesh plans staggered factory holidays to ease power crunch. The system of rolling holidays for different industrial areas is expected to reduce pressure on electricity demand as well as fuel oils for public transport

PKR continues to strengthen against USD

The strengthening of PKR has brought some respite to the end buyers this week, which is expected to improve the market sentiments and offer prices for the limited number of vessels currently being floated in the demolition market.

Imported scrap market improved gradually as the recent gain in the currency brought some relief to scrap buyers and steel mills, which may support fresh bookings.

Domestic steel market has observed weak demand during the week due to heavy rainfall affecting deliveries and holidays for two days on account of Muharram.

The Pakistani rupee continued to strengthen against the US dollar on higher export-related receipts and optimism that country is inching toward securing the International Monetary Fund bailout amid crackdown on foreign exchange dealers. Pakistan has met the last prior action for the combined 7th and 8th review following the increase in petroleum levy on 31st July 2022, says IMF country representative.

Inflation jumped to 24-year-high

Domestic steel prices have increased by about USD 30/MT this week while the imported scrap offers have improved by USD 20/MT. It is not a sign of a strengthening market for steel, but rather a correction after two months of huge decline.

Western sanctions against Russia have given the Turkish steel sector an opportunity to serve as a warehouse and bridge. This was stated by the head of Istanbul Association of Exporters of ferrous and non ferrous metals (IDDMIB), citing Russia has increased demand for Turkish products, which it can no longer receive from European companies, and Turkish companies have received requests from European companies to supply Russia through Turkey.

The European Union and Turkey have agreed the bloc has until Jan. 16 next year to comply with a World Trade Organization (WTO) ruling regarding its "safeguard" measures designed to curb steel imports, the WTO said on Tuesday.