Owing to an expected jump in demand for steel and cement around the globe following the invention of Covid-19 vaccines, the uptrend in local prices for the two commodities has accelerated, which is hampering the recovery of construction activities in Pakistan.
Amreli Steels has announced a hike in the price of rebars by Rs5,000 per ton in addition to an increase of Rs5,000 per ton announced earlier during the month, said JS Global analyst Arsalan Ahmed in comments to The Express Tribune.
“It appears that the decision has been taken on the back of uptick in global scrap prices by almost $60 (Rs9,600) per ton,” he said. “After the recent increase, the price of rebars of the company stands at Rs128,000 per ton.”
Pakistan Association of Large Steel Producers (PALSP) Secretary General Syed Wajid Bukhari said that the price of scrap had soared from $300 per ton in early November 2020 to $450 per ton now due to shortage in the international market.
“The price has risen exponentially and several local mills have stopped buying raw material for now,” he said.
Dawood Hercules Corporation Research Lead Karim Punjani said owing to the rollout of Covid-19 vaccines, the international prices of the two commodities had soared.
“Companies expect demand for their products to skyrocket, hence prices of inputs including coal and steel scrap have hiked across the world,” he said.
Prior to the introduction of vaccines, Covid-19 was denting the global economy, he said. However, following the invention of vaccines, Covid-19 is being perceived as a disease, not a pandemic, which can be contained and losses borne on account of the virus can be recovered.
“This has led to a significant rise in demand,” he said. “Coal was priced at around $80 per ton before the global lockdown was imposed in March and fell to $65 when the lockdown was lifted.”
Given the current jump in demand, the price of coal has jumped to $90 per ton, said Punjani.
He added that local demand for steel and cement also swelled following Prime Minister Imran Khan’s announcement of a relief package for the construction sector.
He pointed out that instead of absorbing the hike in prices of inputs, companies were passing on the impact to consumers.
“A seasonal impact is also being witnessed with regard to coal prices,” he said. “In winters, hydropower plants observe maintenance shutdowns and countries generate electricity through coal and LNG plants.”
However, some builders have a different opinion about the hike in prices of cement and steel as they claim that the producers are taking benefit of the surge in demand for the two commodities.
“It is a conspiracy against Prime Minister’s Naya Pakistan Housing Scheme as well as the national economy,” said Association of Builders and Developers of Pakistan (ABAD) Chairman Fayyaz Ilyas in a statement issued in the backdrop of a sudden rise in steel and cement prices.
He urged the federal government to take immediate action against the industries which were trying to sabotage the steps taken by the government to revive the national economy.
Even though most of the raw material is local, cement and steel manufacturers have raised prices of their products to Rs625 for a 50kg bag of cement and Rs126,500 per ton of steel, which is not justified.
He was of the view that the cartel of cement and steel manufacturers seemed determined to crush the construction industry.
“Cement and steel are the main inputs for the construction sector but manufacturers of the two products are busy minting money without any justification and authorities are helpless to take any steps against these cartels,” he added.
Ilyas pointed out that the construction industry was the second largest employment-generating sector after agriculture, which was the reason why Prime Minister Imran Khan was prioritising the segment. He added that the premier launched the Naya Pakistan Housing Scheme for people, who would otherwise be unable to own homes.
However, steel and cement cartels are bent on spoiling the efforts of the prime minister and inflict a dent on the national economy.
Published in The Express Tribune, December 23rd, 2020.
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