Highlights of the Week

The recent string of sanctions being imposed on Russia are redrawing new trade routes, reorganizing global trade along political lines, defying geography, and efficiency. Due to these complex trade dynamics, it is increasingly difficult for ship owners to decide whether to send their aging assets for recycling and benefit from the elevated steel prices, or to wait for newer trading opportunities being created by changing trade routes. The prices being offered by the ship recyclers from subcontinent remained strong with a steady demand from Pakistan and India to secure tonnage, while the buyers from Bangladesh opted to remain on the sidelines for yet another week.

Oil prices continued their volatility throughout the week with multiple highs and lows but ended with a drop on Friday, burdened by the prospect of weaker global growth, higher interest rates and COVID-19 lockdowns in China hurting demand even as the European Union considers a ban on Russian oil that would further tighten supply. WTI is currently trading at USD 102.50 per barrel.

The International Monetary Fund has cut its global growth forecasts for 2022 from 4.4% to 3.6%, warning that Russia’s invasion could lead to the fragmentation of the world economy into rival blocks. Price pressures are now gathering momentum across economies leading to historic inflation that’s creating a painfully high cost of living.

Demand supported by buoyant export market

The recyclers from India are showing keen buying interest and are bidding competitively to secure tonnage as the demand from mills are supported by a buoyant export market. The Russia-Ukraine conflict and supply constraints from China have spurred the global demand for Indian steel exports, which are expected to hit an all-time high of over 20 Million MT in FY’22.

There are reports of power shortages across the country amid India’s hottest summer in 122 years, as electricity demand has risen and coal inventories have plummeted to the lowest levels in nine years, causing blackouts. Steel mills are experiencing rising production costs due to rising power and coal prices, while demand is waning due to sharp increases in finished steel prices.

Market in a wait-and-watch mode

In the recycling market, very few buying inquiries are being received from the end buyers of Bangladesh this month as the slowdown in domestic demand has kept many buyers away from the market. The majority of yards have adequate inventory in place, allowing them to hold off buying at the current elevated rates. With a weeklong Eid holiday coming up at the end of this month, a clear direction of prices will emerge after the market reopens in May.

Rebar prices remain weak as a result of limited construction activity and decreased demand during the month of Ramadan.

Imported scrap trade remained subdued for another week, resulting in softening of prices by USD 5-10/MT.

Cautious buying amidst PKR free fall

The recyclers from Gadani continue their buying spree but with a cautious approach now as the domestic demand remains low and the country is struggling against rising debts and inflation. Additionally, trading activities have also slowed down due to limited working hours and unavailability of workers during the month of Ramadan.

Despite gaining some ground in the previous week, the Pakistani Rupee continued its losing streak against USD due to the skyrocketing import bill and looming debt repayments. It is currently trading at PKR 186.40/USD.

The 7th Pakistan-IMF review talks are underway and will continue until 24th April. IMF wants the country to revoke the subsidies extended by the Imran Khan government by increasing fuel prices and power tariffs, to revive its Extended Fund Facility.

Sharp drop in prices due to weak demand

One Cruise ship of about 8,500 LWT and one Fishing vessel of about 5,000 LWT have arrived in Aliaga this week.

In the absence of stable domestic demand, steel mills stayed out of the scrap import markets and opted to remain on the sidelines leading to softening of imported scrap price by about USD 25/MT this week.

The local rebar prices have been slashed by USD 25/MT on the back of extreme slowdown in buying activities.

Lira remained stable this week and is currently trading at TL 14.75/USD.