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High Raw Material Costs Cause Concern Among Builders

Steel prices in Pakistan soar to unprecedented levels, creating friction between builders and producers

According to the Association of Builders and Developers of Pakistan (ABAD), rising steel prices have led to builders closing their businesses. Khawar Munir, Senior Vice Chairman of the ABAD, has called for a boycott of steel manufacturers until prices return to normal. As a result of a combination of internal and external factors, including import restrictions and a scarcity of scrap steel produced locally, steel prices have risen.

According to Optimus Research steel analyst Mehroz Khan, the only solution to the current situation is to ease restrictions on scrap imports. Otherwise, the demand and supply gap will continue to widen. A mini-budget announcement resulted in steel manufacturers raising their prices to Rs 350,000 per ton, escalating the cost overruns in the construction industry.

Munir forewarned that the 72 industries connected to the construction industry would suffer as a result of construction projects ceasing and people being unable to take possession of their residential units on time.

In order to lower prices to normal levels and remove the regulatory duty imposed on cement, the leader of ABAD urged the government to take immediate action. In addition, he requested that the government take note of cartelization among steel producers who had teamed up to raise steel prices. Otherwise, he cautioned, the construction sector would stall, resulting in significant losses for the nation and the unemployment of millions of skilled workers.

The secretary general of the Pakistan Association of Large Steel Producers (PALSP), Wajid Bukhari, denied the accusations made by ABAD, calling them careless and false. He clarified that the prices of rebars range from Rs 280,000 to Rs305,000 per tonne and not Rs 350,000 per tonne, as quoted by ABAD.

In order to increase government revenue and end the monopoly of the manufacturers, Bukhari recommended that the government lower taxes on raw materials and permit the import of steel bars.

Shamoon Bakir Ali, the chairman of the Karachi Iron and Steel Merchants Association, advocated for allowing the import of steel bars and noted that with 400 steel facilities in the nation, it is unlikely that a cartel could be formed. However, a lack of industrial raw materials has forced the closure of 30% of the units.

The remaining units use locally produced steel scrap and run at less than 50% capacity. The absence of scrap import has caused the prices of local scrap to jump from Rs120 per kg to Rs195 per kg. Additionally, the price of bars increased by more than Rs100 per kg due to a 25–30% increase in the input costs of chemicals, gas, power, and freight. According to Bukhari, low capacity utilization and high interest rates are causing significant losses for the steel industry.

Written by Imad Khan

Imad Khan has the skills and experience to deliver top-notch content that informs, engages, and inspires. He oftens explores nature in his free time.