Cement, steel prices rise once again

Higher global prices for coal, steel scrap drives local price hike


Our Correspondent January 02, 2021
PHOTO: REUTERS

KARACHI:

A persistent hike in steel and cement prices has continued to nullify the incentives offered by Prime Minister Imran Khan under a fixed tax regime for the construction industry.

Cement prices in the northern region went up Rs10, with the maximum retail price reaching Rs565-570 per bag with effect from December 31, 2020.

“The increase in cement prices comes on the back of a significant rise in international coal prices over the past two months, as per our channel checks,” said Topline Securities Deputy Head of Research Shankar Talreja.

At present, coal prices stood at around $90 per ton free on board (fob) compared to $60 per ton at the end of October 2020, he said.

“Coal is primarily used as a fuel in cement production while some companies also use it for power consumption.”

The increase of $30 per ton in coal prices translated into cost escalation of over Rs30 per bag for the cement producers, he said. In early December 2020, the cement prices rose Rs10 per bag in the northern region. Following the current hike, the total increase has become Rs20 per bag.

“We believe that cement prices have been hiked to pass the impact of swelling coal cost on to consumers,” the deputy research head said.

The analyst pointed out that global coal prices inched upwards during the winter season and the same was being witnessed in the current winter as well.

He projected a decline in coal prices after March 2021, which would give the cement manufacturers enough room to improve margins.

Steel prices

On the other hand, steel prices are also on the uptrend. According to a recent notification sent by Amreli Steels to business partners, the new ex-factory booking rate for deformed steel is Rs135,500 per ton while the company’s Xtreme rebars are priced at Rs134,500 per ton.

“Globally, steel prices are on the rise,” said Pakistan Association of Large Steel Producers Secretary General Syed Wajid Bukhari in comments to The Express Tribune.

According to him, the increase in steel bar prices is the direct result of a drastic rise in the international melting steel scrap prices.

“This phenomenon is not just confined to Pakistan because shortage of scrap is being witnessed across the world primarily due to Covid-related supply chain disruptions,” he said.

“In addition, heavy snowfall in many countries has pushed down the production of scrap and as a result prices of raw material have shot up from $305 per ton in August 2020 to $470 at present,” he said.

“Prices may increase further in the international market.” Dawood Hercules Corporation Research Lead Karim Punjani said that both steel and cement sectors were passing the impact of hike in global prices on to consumers.

“The pent-up international demand for steel is being met right now and we can hope that once the demand is satiated, prices will start declining,” said JS Global analyst Arsalan Ahmed.

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