Karachi, November 11, 2022 (PPI-OT): Pakistan Steel: Shifts in ferrous markets underway

International scrap prices have shown major weakness since mid Aug’22, declining by 13% since then, to currently hover around US$350/ton compared to FYTD/CYTD avg. of US$375/461/ton.

Local rebar prices have conceded from their highs of PkR228-231k in June’22 to stand at PkR210-215k/ton currently, this is in response to declining scrap prices and overall diminishing construction demand.

Also, with flood reparations likely to kick-off anytime during 2HFY23, alongside revival of several delayed projects (Dams, CPEC, intercity transit networks, private projects etc.), we expect demand for overall steel/construction to recover notably by start FY24.

Incase of MUGHAL, the risk profile is somewhat reduced due to its diversified product portfolio and dollar-denominated income from the non-ferrous segment. Overall, MUGHAL remains our top pick in the sector with June’23 TP of PkR87/sh, providing an upside of 35%.