Builders decry high cost of raw material
The current economic crisis, coupled with restrictions on import of steel raw material, has pushed steel rebar prices to significantly higher levels, creating friction between builders and producers of the metal.
Expressing concern over the fate of construction industry, the Association of Builders and Developers of Pakistan (ABAD) in a statement lamented that a surge in steel bar prices forced the construction sector to shut their business.
“We will continue protesting against cartelisation and suspend the purchase of steel at arbitrary prices,” the statement quoted ABAD Senior Vice Chairman Khawar Munir as saying.
He urged association members to continue to stay away from steel purchase until the manufacturers brought prices back to normal levels. Earlier on February 9, ABAD chairman had announced a boycott of steel manufacturers.
Steel prices have gone up over different reasons, which are both internal and external.
“Steel rebar prices soared due to supply shocks, led by import restrictions,” Optimus Research steel analyst Mehroz Khan remarked while talking to The Express Tribune.
Manufacturers raised prices also because of scarcity of locally produced scrap.
“The only solution to this situation is easing restrictions on scrap import,” he suggested. “The prevailing demand and supply gap will continue to widen if appropriate measures are not taken.”
With the announcement of mini-budget, steel manufacturers hiked prices to Rs350,000 per ton while the price of a sack of cement exceeded Rs1,000, adding to the miseries of construction industry, which was already suffering due to cost overruns, said Munir. “As a result, the cost of construction projects has increased manifold.”
The ABAD leader voiced fear that work on most of the construction projects would completely stop and people would not be able to get possession of residential units on time. The situation would also badly affect the 72 industries associated with the construction industry.
He asked the government to take notice of cartelisation among steel manufacturers who had colluded to increase steel prices. He also called on the government to take effective measures to bring down prices to normal levels and withdraw the regulatory duty imposed on cement.
Otherwise, the “construction industry will come to a standstill, causing huge losses to the country and rendering millions of skilled workers unemployed”.
When approached for comments, Pakistan Association of Large Steel Producers (PALSP) Secretary General Wajid Bukhari rejected ABAD’s allegations, terming them irresponsible and misleading statements.
At present, the prices of rebars range from Rs280,000 to 305,000 per ton and not Rs350,000 per ton, as quoted by ABAD, he clarified.
“The manufacturers want the government to reduce taxes on raw material. We would suggest allowing import of steel bars, which will bring government revenue and also break the manufacturers’ monopoly,” said Karachi Iron and Steel Merchants Association Chairman Shamoon Bakir Ali.
“There are around 400 steel units in the country and a cartel cannot be formed with such a large number of units,” said Wajid Bukhari.
In fact, 30% of the units have been closed due to shortage of industrial raw material. The remaining are operating below 50% capacity and procure locally produced steel scrap.
In the absence of scrap import, prices of local scrap have jumped from Rs120 per kg to Rs195 per kg. Also the input costs of chemicals, gas, power, freight, etc went up by 25-30%, he observed.
In this situation, the cost of bars has gone up by over Rs100 per kg. Steel units were suffering huge losses due to low capacity utilisation and high interest costs, Bukhari said.
Published in The Express Tribune, February 25th, 2023.
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