KARACHI: The domestic prices of steel rebars for the first time in the history crossed Rs 200,000 per metric ton mark due to sudden surge in the raw material cost in the international market.
Domestic steel producers on Monday announced to increase the prices of steel rebars by Rs 4,000 to Rs 6,000 per metric ton to rationalize in line with the international market. The price of steel rebars rose to Rs 201,000 per metric ton in the local market.
According to Pakistan Association of Large Steel Producers (PALSP) the prices of primary raw material of the steel industry (scrap) have increased by $ 120 per ton from $550 to $670 in a span of a few days in the world market. The unexpected increase in raw material has compelled the local steel producers to revise the prices of rebars upward.
One of the major factors behind this development is the war between Russia and Ukraine. After the Russian invasion, Ukraine steel scrap prices witnessed an immediate surge in the international steel scrap market.
This situation has sent shock waves the world over and the sanctions against Russia have a profound impact on the international steel market because Russia and Ukraine are one of the world’s biggest producers and suppliers of steel. Russia and Ukraine account for 74 percent of the world’s Wire Rod exports and it is feared that commodity prices can further jump beyond current levels.
Moreover, Russia and Ukraine combined export around 5 million tons of scrap annually, which is almost equivalent to Pakistan’s total scrap imports. The volatile and bullish trend in prices of scrap in the international market, increase in oil/petrol prices, increase in energy prices and volatile ER is making the situation worse for the local steel industry.
“The situation is sending shock waves for the local steel industry as this development will translate into further increase in investments, and also, this could translate into an increase in prices of rebars to at least 20,000 per ton hike in domestic steel market,” PALSP warned.
According to producers, this situation would be very unfavorable for the steel as well as the construction industry of the country as any further increase in prices of rebars is likely to suppress the demand of steel in the country. During the last one year, the prices of scrap more than doubled which resulted in huge increase in investment as some of the smaller players have already gone out of business, they added.
In Pakistan, the steel industry was just settling down and started breathing after coming out of a crisis like situation, this latest unexpected shocking development is likely to make it more vulnerable, they mentioned.
According to steel industry experts this war could have dire consequences for the world steel market as well and steel prices could soar further due to supply chain disruptions. The steel industry is greatly concerned and worried with this current market situation where the cost of inputs is increasing rapidly and it leaves manufacturers with no choice except to pass on the impact to the end consumer.
Copyright Business Recorder, 2022