Pakistan Steel_Local players to benefit from receding scrap prices, (AKD Daily, Feb 04, 2021)
AKD Daily
Pakistan Steel: Local players to benefit from receding scrap prices
- International scrap prices have increased by 38.2% in last 3 months to currently stand at US$405.5/mt compared to CY20 average of US$287/mt as global demand recovers and economic activity picks up while supply struggles to keep up.
- However, during last fifteen days scrap prices have receded by 15% where demand from China slows down as we approach Chinese new year while Iron Ore exports from Australia have also picked up which can be used by BOF-based steel manufacturers as a substitute of scrap.
- Local players continue to witness stellar demand growth conferring them enough pricing power to pass-on the costs so far as local rebar prices have increased by PkR28,500/ton since Nov’20 to currently stand at PkR142,500/ton in South.
- ASTL has performed 123% since 25th Mar’20 against 72% of KSE-100 as increase in prices and upbeat demand invigorated momentum hence we have a neutral stance on the stock where our TP of PkR58/sh provides upside of 13.5% against current prices of PkR51.2/sh. Moving forward, upside to our estimates is expected from divergent trends in local rebar prices and international scrap prices which can provide uplift to margins in short term.
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