KARACHI: Despite an 11 per cent decrease in the world steel scrap prices since July, the local large producers have increased the steel bar rates by 14.5pc and also ruled out any early relief.

The international scrap prices now currently hover around $456 per tonne as compared to last three months average of $493 as global demand slows down with economic recovery stalling on the back of global floods and increasing Delta variant cases in major scrap trading regions.

Mohsin Ali at AKD Securities Ltd said that closure of steel manufacturing facilities, end product supply chain disruptions and policy shift in China where manufacturers cutting down production by 6pc have pulled down the demand for scrap by 11pc since July.

He said local manufacturers pushed up steel rebar prices due to soaring demand from construction sector, surging freight cost hitting $80-100 per tonne versus historical average of $30-40 and the 4pc rupee devaluation since July.

PALSP rules out early relief amid surging freight cost and weak rupee

Medium-term demand for scrap to remain upbeat as repair work in flood affected areas both in China and Europe and the record $1 trillion infrastructure budget passed by US Senate could put upward pressure on scrap prices, he said.

He was of the view that current rebar prices of Rs171,000-173,000 per tonne reflect scrap prices of $505-510 per tonne, assuming margins to sustain at 4QFY21 levels and rupee/dollar parity at 164.

Pakistan Association of Large Steel Producers (PALSP) Secretary General Syed Wajid Bukhari said steel scrap import cycle is of two to three months. The present month arrivals of scrap were purchased in May/June at a price of $580 per tonne.

“The prices may come down in October as current purchases will reach then,” he said that one dollar is now equal to Rs166 in the interbank market which was Rs164 last week.

“If dollar keeps rising in coming months followed by any gas and power tariff hike, they will eat away the benefit of falling scrap price in the world market,” he feared.

Tiles and sanitary

All Pakistan Tiles and Sanitary Merchants Association Chairman Amin Lasania said the prices of locally made sanitary items have risen by 20-25pc followed by 40-50pc hike in local tiles prices in the last three years.

He said the arrival of some Chinese investment in tiles manufacturing has slowed down the pace of price increase being made by the local tile makers owing to rising competition in the market.

A tile manufacturer said 50pc rise in tile prices is not on a par with the massive increase in input cost in the last three years as the industry has absorbed a large portion.

He said gas price, which is 30pc of tile making cost, has risen to Rs1,087 per mmBtu from Rs600 followed by raw material prices arriving from China jumped by 20-30pc depending on the exchange rate parity.

Freight charges relating to axle load management have doubled due to government’s restrictions to 55 tonnes from 100 tonnes. As a result, eight trawlers of 22-wheeler are required to transport tiles instead of four trawlers.

Third Schedule introduced in 2019 for sales tax collection, IT Section 108 and CNIC conditions relating to unregistered buyers have further compounded the costing of tile manufacturing, he said.

The share of tile in total construction of a house comes to 5pc while the bulk share is led by steel bars and cement which have recorded massive hike in the last few years, he said.

“In the last three years, the cost of construction has risen by at least 45pc in view of high steel bars, cement, tiles and sanitary items prices,” he said.

The official said people after spending huge prices on purchasing quality steel bars and cement for grey structure, usually compromise on tile quality.

The market share of local tile manufacturers has soared to 65-70pc from 45-50pc in the last three years, while the share of imported tiles has plummeted to 25-30pc, he said.

Labour charges

According to weekly Sensitive Price Index ending Aug 12, the average daily charges of a painter has risen to Rs1,225 from Rs1,005 in Sept 6, 2018 while a mason (raj) charges Rs1,411 as against Rs1,118.

Daily labour and plumber now charge Rs837 and Rs1,258, respectively, against Rs635 and Rs966 on Sept 6, 2018.

The average price of a 50kg cement bag during the week was Rs672 as compared to Rs572 on Sept 6, 2018.

Published in Dawn, August 29th, 2021