The recent downfall in steel prices is an outcome of lack of buying interest from China but we are cautiously optimistic that the demand for steel will remain steady albeit some minor corrections. The demolition market witnessed softening of about USD 15-20/LDT in all three major subcontinent markets i.e., India, Pakistan, and Bangladesh as the end users have lowered the pace of buying due to elevated prices. The existing shortage of units available for recycling will ensure that prices remain supported in the range of USD 550-600/LDT.
The demand for containers is retreating thereby softening ocean freight rates by about 20% because its already too late to ship goods from Asia to North America in time for the holiday shopping season. However, the world’s supply chain crisis is far from getting over and it will take at least one year for freight rates to go back to pre-pandemic levels.
Oil prices dropped this week as the US along with other major oil-consuming nations like China, India, Japan, South Korea, and the UK have released oil from their reserves in an attempt to bring down soaring prices. Additionally, a new COVID-19 variant spooked investors and added to concerns that a supply surplus could swell in the first quarter.
The new coronavirus variant - B.1.1.529 - has been red-flagged by scientists which led to many countries stopping flights or strictly scanning passengers from South Africa, Botswana and four other African nations.
The domestic price of steel plates has markedly reduced this week as the end user industries have decreased their consumption pace to wait for the prices to cool down slightly before placing new orders. This is leading to a decline in offer prices from end buyers of Alang for the available tonnage in the market.
As the benchmark Chinese export prices fell sharply, the current domestic prices are at a premium to import parity, leading to expectations of a further drop in the prices.
The offer prices from Bangladesh are indicating a notable decline in demand for steel plates as the major end user i.e., the construction sector is not being able to absorb the elevated price levels. The housing deals which were finalized at the previous rates are unfeasible to be executed at the current raw material prices, thereby forcing the builders to halt the projects for the time being.
Imported scrap offers have recorded a slight decline following the global price drop.
The scrap prices have remained volatile with a sharp dip in the beginning of the week followed by a rebound from Wednesday onwards as the material shortage and restocking needs kept the prices supported. The offer prices from recyclers have softened by USD 15/LDT but the buying interest remains stable.
Imported scrap prices have dropped by USD 5/MT as the mills hold back from making active purchases at the prevailing price levels. Import costs are also being impacted by a weakening rupee dollar parity.
The International Monetary Fund has rejected Pakistan's request for borrowing and did not agree on any meaningful accountability of the State Bank of Pakistan leading to further exchange rate depreciation. PKR is currently trading at 176.65/USD
The imported scrap prices fell by about USD 5-10/MT whereas the domestic scrap prices remained stable.
Turkish Lira crashed to a record low of 13.44 after President Erdogan defended recent sharp rate cuts. The central bank has slashed rates by a total of 400 points since September, leaving real yields deeply negative as virtually all other central banks have begun tightening against rising inflation. Contrary to traditional economic theory, Erdogan argues that high interest rates cause inflation.
The UAE announced an establishment of a USD 10 Billion fund to support investments in Turkey which will reportedly prioritize strategic long-term investments in fields such as energy and health sectors.