Steel raw material: PALSP regrets govt’s refusal to reduce duties

ISLAMABAD: The large steel producers have regretted that the government has refused to reduce import tariffs/duties on the primary raw material of the steel sector needed to support Naya Pakistan Housing project.

According to a statement of Pakistan Association of Large Steel Producers (PALSP) issued here on Thursday, the association rejected the statement made by Association of Builders and Developers (ABAD), accusing steel sector for damaging Naya Pakistan Housing Project.

The surge in prices is not confined to steel bars only as there has been phenomenal increase in the cost of construction materials like cement, bricks, sand, crush etc.

The Steel manufacturers of Pakistan are selling rebars at a lower price as compared to international market prices by absorbing the constantly increasing cost of inputs.

In the recent past, the prices of scrap have skyrocketed. The average monthly price of steel scrap as per London Metal Exchange (LME) in June 2020 was $260 and now the latest price in the month of July 2021 has crossed the price tag of $540 per ton.

Similarly, prices of steel rebar in international markets as per LME last year July was $420 and in July 2021 the average rebar prices C&F (assuming ZERO Duty) are $831 in Turkey and $845 in China whereas, in Pakistan the rebar prices without duty and landing charges on scrap is $794.

If we compare the prevailing international prices with our local markets, the prices in Pakistan are still at approximately 6 percent to 4 percent cheaper than China and Turkey respectively, which are among the largest steel producing countries.

Current market situation is beyond the control of manufacturers for the reason that domestic steel industry is largely dependent on imported raw material and prices of steel are directly related to international prices of scrap/raw material.

Pakistan’s steel industry is selling bars at lower prices by constantly reducing their margins which is evident from the fact that their gross margins which were 19 percent plus in the period from 2015 to 2018 to 12 percent currently.

In addition to that, in the recent budget the government dropped a bombshell on the long steel sector by giving FED exemption to erstwhile FATA/PATA, hence, giving competitive advantage to the steel industry of that area of Rs 25,000 per ton, which is likely to throw the documented sector out of competition and ultimately this could lead to closure of the domestic steel industry in rest of the country, association maintained. Also, in recent budget the government gave relief to the flat steel sector. However, unfortunately, no relief was extended to the long steel sector and despite repeated requests, the government refused to reduce tariffs/duties on the primary raw material of the long steel sector which was very much needed to support government ambitious initiative of the Naya Pakistan Housing project.

Instead, the government resorted to totally ignore the long steel sector that has to play critical role for the success of the ongoing housing as well as mega infrastructure projects, it added.

Copyright Business Recorder, 2021