The ship recycling market is gradually gaining momentum following an extended period of inactivity with inquiries coming from the end buyers of India and Bangladesh. While the domestic steel demand is improving in both these regions, the market in Pakistan is at a standstill due to floods that have halted all transportation activities. Although nothing can be predicted with certainty in the current times due to the multitude of factors affecting the world economy on a daily basis, but we believe the offer prices will remain stable and may even strengthen further in the coming weeks due to prevailing scarcity of tonnage being circulated in the recycling market.
The Russia-Ukraine war completes six months this week and it spillover effects have given a serious hit to the European economy. With Euro falling to a two-decade low and UK inflation soaring to a five-decade high, a global recession may start from Europe. The continent is grappling with the worst energy crisis in decades, with spiking costs of gas and electricity driving inflation and threatening to drag economies into recession.
The founder of Huawei has sparked alarm in China warning of economic troubles and a global downturn in a leaked internal memo which was meant for the company's internal staff. “The next decade will be a very painful historical period, as the global economy continues to decline,” Ren Zhengfei said, pointing to the pandemic as well as the impact of the Ukraine war and a “continued blockade” by the US on some Chinese business.
Jay Powell declared the Federal Reserve “must keep at it until the job is done” in his speech today at Jackson Hole where he delivered his most hawkishmessage to date on the US central bank’s determination to tame soaring inflation by raising interest rates. He predicted painful period for householdsand businesses, but added that the failure to restore price stability would mean far greater pain. He also highlighted that reducing inflation wouldprobably result in “a sustained period of below-trend growth” and predicted there “will very likely be some softening of labour market conditions”.
Steel demand and prices have gained stability in the domestic market leading to an increase in prices being offered by the recyclers of Alang to secure tonnage. With very few units available in the recycling market, the end buyers appear willing to engage in competitive negotiations to secure tonnage.
The Indian rupee in recent sessions has struggled in the backdrop of a resurgent US dollar. It is currently considered in a vulnerable stage as a potential wave of risk aversion can be triggered if there is an overtightening from US Federal Reserve.
India for the first time on Wednesday voted against Russia during a "procedural vote" at the United Nations Security Council on Ukraine. So far, New Delhi has abstained at the UN Security Council on Ukraine, much to the annoyance of the Western powers led by the United States.
The end buyers of Chattogram are gradually gaining confidence to offer competitive prices to secure tonnage as the market is expected to pick up in September which is considered a favourable season for construction activities. With most of the recycling yards running on low or no inventory, the recyclers are actively scouting the market for small tonnages which can be acquired with the ongoing LC restrictions.
BDT remained stable throughout the last week due to the various actions of the central bank. Currently, import Letters of Credit are settled between BDT 105-106/USD whereas banks are encashing export payments dollars of exporters at BDT 102-103/USD.
Government offices and banks will shorten their workdays by an hour and schools will close an additional day each week to reduce electricity usage amid concerns over rising fuel prices and the impact of the Ukraine war.
The Pakistan government has declared a national emergency following a series of rain-induced floods that have affected over 33 million people andkilled more than 937 people. In Gadani, conditions are extremely quiet due toheavy rainfall. Currently, transportation is at a standstill as roads aredamaged, cutting off communication and access to the roads. Considering theextent of the disruption, it seems that things will take some time to normalize.
The imported scrap market slightly softened by USD 5/MT and remained largely quiet throughout the week as continuous volatility in currency exchange rates and subdued demand kept buyers cautious.
Saudi Arabia has announced that it will invest USD 1 Billion in Pakistan to help the country with its current economic difficulties as it faces a balance of payments crisis with foreign reserves having dropped as low as USD 7.8 Billion, barely enough for more than a month of imports. Additionally, Qatar has announced an investment of USD 3 Billion in Pakistan by leasing airports, setting up fuel terminals at seaports, acquiring LNG plants, and investing in solar parks.
Imported scrap offers strengthened by about USD 5/MT in recently concluded deals due to scarcity of material and high offers being accepted by the end buyers.
US warns of sanctions against Turkish companies over close ties and increasing business activities with sanctioned Russian individuals and organizations.
Mills kept rebar prices stable as they have low margins and cannot reduce prices despite dull demand.
The Central Bank of the Republic of Türkiye has imposed penalties on high lending rates, especially on charging risk premium for riskier loans. This move is not welcomed by economists as they feel it will interfere in safe pricing of risky loans and add further pressure on the lira.