Downfall of Steel Scrap import in Pakistan?

The Steel Industry of Pakistan imports various types of scraps from all across the globe. Imported scrap material in Pakistan shows a massive drop of 17% from 1.74% in JAN-MAY for FY2021 to 1.44% in JAN-MAY FY 2022. Construction & mining machinery showed a decline of 15% from $50 million in Jan-March, 2021 to $ 43 million in Jan-March 2021-22.

This decline is due to political instability, less money supply, and a global petroleum price hike.
Russia and Ukraine are significant exporters of Metal, Oil, and Gas. The Russian-Ukraine war has impacted the supply chain worldwide, which not only deteriorated the confidence of importers but also became a cause of global inflation and declining imports.

Money Supply (M2) decreased from 6.7% in March FY21 to 2.7% in FY22 in Pakistan, resulting shortage of liquidity for importers. The increased monetary policy rate had raised the loan cost and inflation. Total imports of Pakistan in 2021 were $15.04 million and increased to $18.31 million in FY2022, showing an increase of 22%. Increased value was due to the high petroleum prices and a fall in the value of the rupee to RS 185.63 in March.

Political instability in Pakistan has contributed to the decline in imports. Iron and steel scrap imports decreased by 15% from $ 731.104 million in Oct-Dec 2021-22 to $625 million in Jan-March 2021-22. Iron and steel products imports fell by 22% from 828.68 million in Oct-Dec FY2021-22 to $648 million in Jan-March FY2021-22. Mineral fuels, iron & steel had been imported more from South Africa in March 2022.

Import conditions are much more challenging as banks have delayed discounting letters of credit LC, contributing to the fall in imports from Pakistan. Steel mills of Pakistan are reluctant to enter the scrap market due to the high cost of imports after the rupee depreciation. The government could not control the depreciation of the rupee due to the lower level of foreign reserves, and sellers have weak confidence in selling to Pakistan due to the fear of potential bankruptcy of the country.