Steel prices fall after steep rise

Decline a sigh of relief for recovering construction industry

KARACHI:

Steel demand, which had risen in the wake of lockdowns during the Covid-19 pandemic, has started easing in the international market and as a result prices of steel rebars are coming down in Pakistan, providing a sigh of relief for the recovering construction industry.

“Owing to a decline in the international cost of steel scrap, rebar prices are falling in Pakistan,” said JS Global analyst Arsalan Ahmed on Tuesday.

Earlier, the Covid-19 pandemic brought major sectors of the world to a standstill and overall economic activities also came to an abrupt halt.

Due to the lockdowns, import and export cargoes remained stranded at ports for months, however, the rollout of vaccines encouraged governments to restore economic activities gradually. The accumulation of steel demand led to a hike in its cost, hence, local rebar prices rose from Rs117,000 per ton in November 2020 to Rs140,000 per ton at the end of January 2021.

Taurus Securities analyst Ameer Hamza recalled that international prices of steel scrap had risen dramatically over the past few months due to supply shortages around the globe.

He added that local long steel players also hiked rebar prices on account of soaring international scrap prices. They hovered near Rs142,500 per ton a few weeks ago but now prices are dropping.

“Individuals expected prices to normalise eventually and steel prices have now fallen to Rs130,500 per ton,” said Pakistan Large Steel Producers (PALSP) Secretary General Syed Wajid Bukhari.

Prices of rebars had increased in Pakistan after the cost of scrap shot up from $350 per ton in October 2020 to over $500 in early 2021, he said. He pointed out that scrap prices soared due to cold weather in many countries coupled with Covid-related supply disruptions, which ultimately resulted in low scrap collection.

“Prices of steel rebars are expected to shrink further in the coming months as the domestic industry prepares for changing dynamics in the post Covid world,” he said. “This declining trend in steel prices is a ray of hope for the domestic construction industry.”

The domestic steel industry faced a severe crisis over the last two to three years and most companies in the documented sector declared hefty losses but still they did not pass on the impact of hike in rebar prices, said Bukhari.

Some of the factors that contributed to the situation were rupee depreciation against the dollar, a steep increase in interest rate by the State Bank of Pakistan and change in the tax regime in 2019 which increased the burden of sales tax.

Prices of steel bars used in reinforced concrete construction rose 20-25% in the last three months, he said.

However, the steep price hike since November 2020 was not only witnessed in the steel sector but also for other construction items such as cement, pipe fittings, bricks and tiles.

“The current trend of falling prices provides a silver lining,” remarked Bukhari. “This development will support the Naya Pakistan Housing Programme, which will launch a pilot project in Punjab shortly.”

Published in The Express Tribune, February 17^th, 2021.

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