The prices of mild steel bar have shot up by approximately Rs 10,000 per ton to around Rs 69,000 per ton in the wake of slow supply and soaring raw material prices in domestic markets. Industry sources told Business Recorder on Thursday that ship breakers and melters are taking full advantages of the short supply of raw material and are gradually increasing prices of their products, while the re-rolling mills are facing losses due to increasing price of raw material.
Recently, Pakistan steel has also announced to raise the price of Billet - a basic raw material of mild steel bar, up to Rs 4,000 per ton to rationalise its prices with international market. Therefore the prices of steel bar have increased by approximately Rs 10,000 per ton during the last two weeks in the domestic market due to soaring prices of raw material like billet, scrap and CC Billet.
The prices of milled steel bar made by scrap has reached around Rs 62,000 per ton from Rs 52,000 per ton, while billet made steel bar prices have mounted to approximately Rs 68,000-69,000 per ton, which previously were selling at Rs 58,000-59,000 per ton in the domestic market. "Increase in the billet and scrap prices by ship breakers and melters have compelled the re-rolling mills to raise the prices of steel bar," sources said.
At present, the ship breakers cost stood at approximately $360-400 per ton, however they are selling ship plates at Rs 50,000-52,000 per tons, which is very high as compared to their cost, they said, adding that "even if ship breakers cost is $425, the cost of ship plates should not be higher than Rs 45,000-46,000 per ton".
According to sources, the melters are also selling Continuous Cast Billet (CC Billet) at around at Rs 58,000-59,000 pet ton and Ingots at Rs 55,000 per ton, which previously was being sold at Rs 49,000 and Rs 45,000 per ton only two weeks ago. Although the international prices have also gone up, but despite that increase in the CC billet and Ingots prices is not justified as there is no customs duty or sales tax on the import of melting scrap.
Sources said that applying no check on the prices is the basic reason of sky rocketing raw material prices in the domestic market and no supply of billet by Pakistan Steel has given some more opportunities to other players like melters and ship breakers to earn high profit by supplying expensive material to the re-rolling mills.
While the re-rolling mills are stuck up in the middle of consumer and raw material suppliers, their margins have also come down as they are not able to pass on the current increase in raw material to the consumer due to slow demand, they added. Re-rolling mills are compelled to absorb some increase in the cost, which is going up on the back of increasing electricity and gas tariff, besides increase in prices of raw material, they said.