KARACHI: While expressing their strong resentment toward the justification for pushing up prices to unprecedented levels of up to Rs303,500 per tonne, builders and developers have suspended the purchase of steel bars for seven days.

Association of Builders and Developers (ABAD) Chairman Altaf Tai said no steel bars would be unloaded at the construction sites of the association’s members from Friday.

He said the members would review the situation and decide the future course of action next Wednesday.

When asked whether builders had lifted the required quantity and then announced the suspension, he said it is impossible to pile up steel bar stocks in bulk quantity by the builders. Manufacturers have persistently been jacking up the rates citing costly scrap on world markets and a shortage of raw materials in the local market.

However, the average per tonne price of imported iron and steel scrap during IHFY23 fell to $567 from $581 in the same period last fiscal year based on the import of 1.244m tonnes ($706 million) as compared to 2.116m tonnes ($1.231bn) in IHFY22.

On any solution to bringing down the prices of steel bars, the ABAD chief said as per the current iron and steel scrap rate of $470 per tonne including taxes and duties on imports and one dollar rate of Rs270, the steel bar rate should not cross Rs250,000 per tonne.

The manufacturers of steel bars are making windfall in absence of any regulatory check by the government.

There is another option to bring finished steel bars from Iran in just 10 days under barter trade which would cost Rs225,000-230,000 per tonne, he claimed.

Mr Tai said the cost of good quality construction has soared to Rs7,000 per sq ft from Rs4,500 one and half years back due to the main role of steel bars and cement prices. He said that construction activities have been moving at a snail’s pace but the loan agreement with the International Monetary Fund and long stability in rupee-dollar parity may revive some economic activities.

While trying to justify price hikes in steel bars, Pakistan Association of Large Steel Producers Secretary General Syed Wajid Bukhari said that letters of credit are not being opened due to a paucity of foreign exchange. As a result, the imported scrap (raw materials) is not coming into Pakistan. The market is running as per local scrap prices.

He said local scrap was Rs128 per kg while steel bar price was Rs210 per kg. Now the local scrap is Rs210-220 per kg and the bar prices had jumped as per this change.

Mr Wajid claimed that mills are running on 25pc capacity thus resulting in a drastic increase in production costs.

Apart from the above factors, he said the increase in the cost is also due to massive rupee devaluation followed by demurrage and detention charges on containers stuck at ports. The highest-ever interest rates have broken the back of the steel sector. As a result, whatever industry earns during this year, would be paid back to banks in the shape of high-interest rates, he added.

He urged the government to come up with a local scrap production policy like India on a war footing.

Published in Dawn, February 10th, 2023