Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

The Pakistan Association of Large Steel Producers (PALSP) has reacted sharply against remarks made by the Association of Builders and Developers (Abad) who claim, the hike in rebar prices by domestic producers is part of a conspiracy to derail the Naya Pakistan Housing project.


In March 2020, the Pakistani government launched a five-year plan called Naya Pakistan Housing for the development of affordable housing in the country. The scheme aims to annually build 400,000 housing units in rural areas, 200,000 units in peri-urban areas and 400,000 units in urban areas.


Higher prices of houses as well as increased prices of building material including steel has triggered a war of words between Pakistan’s steelmakers and the real estate industry. The two associations are blaming each other for the rise in the price of homes, especially in the urban areas.


The builders’ association recently remarked, the steel and cement manufacturers are indulging a cartel. These industries raised prices after construction activities took off with the launch of the Naya Pakistan Housing project. Abad stated that the continuous hike of steel bar and cement prices is a conspiracy against the Prime Minister’s Naya Pakistan scheme and the nation’s economy.


Due to the price hikes, builders are unable to complete projects and people are finding it difficult to buy their dream homes, the statement added. Abad called for anti-completion action against the steel and cement industries.


Contesting these claims, the steelmakers association PALSP said in a statement that housing prices have increased significantly due to real estate developers’ desire for high margins. Steel producers called for fixing the prices of various categories of real estate. They also suggested an audit of the income tax contribution of real estate developers to bring transparency into the sector.


Supporting its position, PALSP stated that from August 2020 to August 2021, scrap prices on cnf Karachi basis shot up from $299 to $530, which is a 79pc increase in the cost of key raw materials.


Davis Index’s data shows, the rebar versus scrap spread has widened year over year, but the consistent depreciation of the Pakistani rupee against the US dollar and high electricity tariffs have also raised the input cost for steel producers.


From August 2020 to August 2021, electricity cost has increased 37pc from PKR13 to PKR20 per unit. These other input costs of steelmakers continue to pressure their margin, despite the hike of finished steel prices. In August, the Pakistani currency was near an 11-month low of PKR166 against the US dollar. 

Rebar versus scrap spread for Pakistan August 2021 YoY

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