Domestic steel re-bar prices likely to cross Rs150,000 per tonne

ISLAMABAD   –  The domestic steel re-bar prices are feared to cross Rs150,000 per tonne on massive surge in global scrap rates, which have gone up from $350 per tonne in October to $455 per tonne.

The industry sources say the higher steel prices could jeopardize the government’s plans to encourage the construction sector in general and housing in particular unless it takes immediate measures to help the steelmakers bring down their prices through reduction in their electricity bills and decrease in turnover/minimum tax. The industry needs the government’s assistance on a war-footing to survive, they say. 

The sources say the industry was struggling to cope with rising international scrap prices when the government raised the power tariffs by 10pc. “Global scrap prices are set to spike with growth in demand for ferrous scrap in China to 12 million tonne a year,” Wajid Bukhari, Pakistan Association of Large Steel Producers (PALSP) secretary general, said in a statement. “The increase of Rs4 per unit in the electricity tariff for Pakistan’s nascent steel industry will prove to be the proverbial last straw on its back and detrimental to the government plans for affordable housing for the low-middle-income people.”

Further noted, that members of the Pakistan Association of Large Steel Producers are one of the major consumers of K-Electric. PALSP has lodged a severe protest over the recent increase in tariff through SRO No. 192 dated 12th February 2021. This increase is creating crisis like situation for the struggling steel sector of Pakistan. Through this SRO Rs. 1.95 / kwh has increased in variable charges and Rs. 40/kw/month increase in fixed charges. Fixed charges should be reduced instead of increasing it. If a consumer is using its connection and paying variable charges and should be levied only when variable charges are under certain threshold. 

According to Pakistan Bureau of Statistics, the imports of iron and steel scrap into Pakistan rose by 13.5pc in 2020 as compared to the previous year with annual iron and steel scrap imports rising to 4.57 million tonnes from 4.02 million tonnes. The industry has long been pleading for cut in the turnover tax of 1.5pc on the steel industry to 0.25pc to provide it a breathing space. “We’ve been pursuing the matter for long and in principal there has been broad consensus that this is an unfair tax on the documented sector, which is already bleeding. The authorities say the issue will be addressed in the upcoming budget, which is not justifiable because it will be too late for the industry by then,” PALSP argues. 

“The steel industry operates on very thin margins. Thus, the existing rate of minimum tax is not only a burden on the cash flow of manufacturers but will also discourage future investment in the industry. It also discourages documentation of steel transactions. The FBR also makes only a little revenue from it because the downstream sector of the long steel industry remains undocumented,” concluded Bukhari. 

Another major issue facing the documented steel sector is the tariff anomalies which are creating unfair competition in this sector and making the documented sector to bleed money.