Steel prices continue to correct worldwide, leaving ship recyclers in a state of confusion as they are not able to provide a firm offer in such volatile conditions. While the lack of units available in the recycling market coupled with sharply declining inventories in the recycling yards are strong enough reasons for end buyers to offer competitive prices in order to secure tonnage, there still remains a huge gap between the price expectations of sellers and buyers. This week saw offer prices from India and Bangladesh softening further in tune with their domestic prices whereas offers from Pakistan remained stable due to limited supply of scrap in their domestic market. It remains to be seen at what level both sides will converge and shake off the sluggish market!
US President Joe Biden signed a legislation on Thursday aimed at cutting overseas shipping prices, empowering Federal Maritime Commission(FMC), the U.S. agency that oversees ocean shipping, and increasing transparency of industry practices. The President also stressed that a concentration of corporate shipping power in the hands of very few large and foreign-owned companies has driven up shipping costs, hurting businesses and exacerbating inflation.
Stocks tumbled around the globe as recession fears resurfaced, with the Federal Reserve struggling to combat inflation that has proved much persistent and widespread than anticipated, while the world is speedily approaching an energy crisis for which it is woefully unprepared.
The United States on Thursday imposed sanctions on Iranian petrochemical producers as well as Chinese and Indian brokers, expanding pressure amid a deadlock in negotiations on restoring a nuclear deal with Iran.
Domestic steel prices have nosedived 20% in past two months and an anticipation of a further price decline is keeping the ship recyclers on the sidelines as they prefer to wait and watch for the prices to stabilize before making any purchase in the ongoing market conditions. Despite many yards running empty after recycling all the inventory they had, very few inquiries are coming from recyclers of India.
Indian exports offers are expected to remain modest amid lower demand and falling global prices. Also, with monsoon season looming, steel demand may further wane.
Sluggish demand in the domestic and international markets, combined with a high-cost operating environment, is prompting some steel mills to consider production cuts.
The end buyers from Chattogram are having difficulty in obtaining finance for medium to large sized tonnage as banks are reluctant to open letters of credit for high value transactions due to declining forex reserves. The offer prices have further softened by USD 20/LDT this week due to subdued steel demand in the domestic market.
Government backtracks from US Dollar free float concept as the value of Bangladeshi Taka kept falling continuously. Now, all the authorized dealer (AD) banks have been advised to quote their exchange rates uniformly instead of individually as was allowed from June 2.
Onset of monsoon in most parts of the country has slowed down consumption from end-users, making the mills more cautious in booking fresh material.
The week began with a positive sentiment among ship recyclers of Gadani as a result of an efficient Budget for F.Y. 2022-23 and a tight supply of scrap in the market, but soon the sentiments changed with a sharp drop of about USD 60/MT in imported scrap prices, causing panic among the steel industry participants.
Pakistan’s government has hiked fuel prices by up to 29 per cent, removing all subsidies given on petroleum in an attempt to trim the fiscal deficit and secure critical support from the IMF for the cash-strapped economy. The latest rise came on top of an already PKR 60 increase in the prices of petroleum since May 25.
PKR saw no respite and fell to 209.13 against USD due to market's panic over the revival of the USD 6 Billion Extended Fund Facility as the IMF expressed concern over the country's recently released budget.
Majority of steel mills have taken a step back to check the market situation, as demand from downstream sectors is yet to improve. Steel producers are primarily focused on finished steel sales, while suppliers are cautious about offering further discounts.
Imported scrap prices softened further by USD 30/MT week on week.
Lira remained steady this week after a continual decline in past few weeks. Turkey is making another effort to arrest a precipitous decline in its currency by dangling cheaper and longer lira loans to exporters if they commit to selling more of their foreign income and avoid driving up demand for dollars.