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A persistent hike in steel and cement prices has continued to nullify the Prime Minister Imran Khan’s Construction Package under a fixed tax regime for the construction industry.
For the week ended 31st Dec 2020, Cement prices inched up by +2% on month-on-month basis to PKR 587/bag. Prices in North region saw an increase of +3%m/m to PKR 574/bag whereas in South prices remained stagnant PKR 612/bag.
“The increase in cement prices comes on the back of a significant rise in international coal prices over the past two months, as per our channel checks,” said Topline Securities Deputy Head of Research Shankar Talreja.
Coal prices stood at around $90 per ton free on board (fob) compared to $60 per ton at the end of October 2020, he said.
“Coal is primarily used as a fuel in cement production while some companies also use it for power consumption.”
The increase of $30 per ton in coal prices translated into cost escalation of over Rs30 per bag for the cement producers, he said. In early December 2020, the cement prices rose Rs10 per bag in the northern region. Following the current hike, the total increase has become Rs20 per bag.
Decline in coal prices is expected after March 2021, which would give the cement manufacturers enough room to improve margins.
On the other hand, steel prices are also on the uptrend. According to a recent notification sent by Amreli Steels to business partners, the new ex-factory booking rate for deformed steel is Rs135,500 per ton while the company’s Xtreme rebars are priced at Rs134,500 per ton.
“Globally, steel prices are on the rise,” said Pakistan Association of Large Steel Producers Secretary General Syed Wajid Bukhari in comments to The Express Tribune.
According to him, the increase in steel bar prices is the direct result of a drastic rise in the international melting steel scrap prices.
“This phenomenon is not just confined to Pakistan because shortage of scrap is being witnessed across the world primarily due to Covid-related supply chain disruptions,” he said.
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