Ferrous scrap suppliers are facing higher costs from new surcharges announced by major container shipping firms on trading routes to Pakistan, following recent geopolitical tensions in the region.
Shipping lines have announced imminent emergency operational cost recovery surcharges on containers for trading routes to and from Pakistan following the recent escalation in tensions between the country and India. This resulted in days of fighting, with India launching attacks on Pakistan and Pakistan-administered Kashmir in retaliation for an April terrorist attack in Kashmir.
India-Pakistan relations have stabilised after the countries agreed a tentative ceasefire on 10 May, but concerns remain over security in the region.
Major global container shipping line Maersk has imposed charges of $300/container to Pakistan from every country, excluding those in Asia-Pacific, starting from 21 May or 13 June, depending on the country. Surcharges of $300-500/container have been implemented on trade from Pakistan.
Other lines, including MSC, Hapag-Lloyd and CMA CGM, have announced surcharges on imports and exports ranging from $300-800/container, depending on line, route and trade direction, which will start coming into effect from mid-May for most regions, with those for other regions such as North America coming into effect in the first half of June.
The Pakistan and Indian governments at the start of May imposed shipping orders banning merchant vessels bearing the other country's flag from stopping at their ports. And shipping lines changed trading routes across the region following the outbreak of hostilities and prior to the ceasefire announcement.
But Maersk said this week it is "witnessing a gradual return to normalcy" at port operations in India and Pakistan, and will continue to monitor the situation closely. Indian imports/exports can remain on board through Pakistan ports, while in India, Pakistan imports are allowed to transit through Indian ports but not exports, the firm said earlier this week.
Any increase to freight costs is likely to further limit exporters' interest in selling to the region, which has already slowed significantly, market sources said. As a result, some container exporters and freight forwarders do not expect the surcharges to remain in place.
Containerised scrap suppliers said prices to Pakistan would need to rise by around $10/t to absorb the additional surcharges, but many noted difficulties, with buyers in the country not lifting their bids and their own purchasing prices upstream remaining firm.
The last containerised shredded scrap sales to the south of Pakistan were reported in the $370-375/t range, which buyers are heard to be continuing to target. But domestic prices for shredded scrap in key supply regions remain firm, with inland yards not willing to accept lower prices sought by suppliers. Exporters would need one of the two price points to move to make trade with Pakistan workable.
