Scrap: Local consumers not getting global price cut benefit

ISLAMABAD: Despite a significant reduction in global scrap prices which declined from $644 to $365 per ton, the local industry has not passed on the benefit to the end consumers in Pakistan, officials said.

According to official documents of the Ministry of Industries and Production, and market sources, globally scrap prices jumped from $261 in July 2020 to $644 in March 2022, which in October 2022 declined to $365 per ton or 56.68 percent, while local steel manufacturers are still charging Rs244,000-260,000 ($1,084.4-1,155.6) per ton from consumers.

The officials said that steel re-bars were being sold at Rs112,000 in July 2020, which, following an increase in global prices locally went up to Rs244,000 per ton. In terms of Pakistani currency, scrap cost to a steel mill is Rs82,125 per ton which after processing is available to the end consumer at three times high prices.

They said that some 400 steel manufacturing units were operational in Pakistan and 200,000 workers were directly involved in the industry. The officials said that owing to a declining trend in global scrap prices, the local re-bars’ prices are likely to reduce in January 2023.

Giving the reasons behind no reduction in local steel products’ prices, the officials said that high energy cost, depreciation of the Pak rupee against the US dollar, and taxation and duties on the import of the scrap are the major reasons behind the increase in local re-bar prices. The officials said that the reduction in taxes, duties, reducing energy costs, and appreciation of the Pak rupee will help reduce the prices.

The officials said that government can announce special energy costs for the steel industry to reduce the prices. Moreover, a viable value chain study on steel prices should also be carried out to point out effective factors in rationalising the steel prices.

Pakistan’s steel industry was consuming around 1,000 megawatts of electricity and there is a need to facilitate the industry on account of energy costs after conducting a comprehensive study as it will help grow the industry and enable it to create more jobs, the officials said.

According to the officials, the country’s steel industry was annually consuming four million tons of scrap, of which, 2.88 million tons is imported costing $2.65 billion, while the rest 1.12 million tons is locally arranged.

The officials said that as per policy, Pakistani steel importers are allowed to import steel bars and billets from across the world excluding India and Israel.

Copyright Business Recorder, 2022