Pakistan is quickly heading towards a situation wherein it may be left with no source of supply of scrap (raw material for steel industry). A much visible crisis may leave many industries redundant, reducing the viability of some others in the days to come.
The two recent developments of China-Australia $ 7 billion accord on sole supply of scrap and obsolete ships to the former and European Union, reduction in duty on scrap for the US have been signalling a serious crisis for Pakistan.
Its immediate impact on Pakistan is visible in the form of unprecedented increase in billet prices supplied by Pakistan Steel to downstream steel industry.
The increase in prices of the products has already slowed activities in many areas.
Steel re-rolling, housing, construction and many other industries are already in difficult position and many of them may not be able to continue with their activities in a couple of months.
The crisis would definitely slow down Pakistan's pace of progress as it is bound to suspend supply of steel to many mega projects. Whether it is raising of dams or construction of new dam or new highways, one can not even think of completing any project--mega or small--if their basic component, steel, is not available at rational rates.
The same is the case with the housing industry. The higher rate of steel has made it difficult for any individual to buy steel @ Rs 35000 or Rs 38000 per ton and construct a house to live in.
All Pakistan Contractors Association has rightly cautioned the government that increase in steel prices was making it next to possible for them to continue with their construction projects. The contractors have conveyed to the decision-makers in writing that they are going to abandon projects in progress due to higher steel prices.
Cottage industry which plays key role in achieving exports target is perhaps most vulnerable to the crisis. A number of small industrialists are feeling it difficult to absorb irrational increase in steel prices and hence have no other option but to close down their units and look for other means of income to provide bread and butter for their families.
Ayub Butt, a small industrialist from Gujranwala, is confronted with the similar situation. He has told his one dozen workers that they will be discharged from work after March 31, as he is going to close down his iron industry due to continuous loss.
He was getting reasonable profit from his industry and paying handsome wages to his workers. All was well but increase in steel, a raw material for his small iron industry, has changed his profit-making situation into loss.
It is not the tale of one Ayub Butt but of many whose business future is now uncertain.
Interestingly, Pakistan Steel is indifferent to the situation. Its management perhaps considers higher prices a blessing in disguise for additional income but it must know that such situation can not go for a long time.