KARACHI, March 4: Auto parts makers have started suspending their production besides closing down their shifts and foundries owing to raw materials' sky rocketing prices and their looming shortage.

Around 40 units have suspended their operations, while majority of the foundry units have touched the half level production due to phenomenal jump in prices of steel and pig iron (raw materials) in open markets coupled with shortage and hoarding, chairman Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM), Nabeel Hashmi told Dawn from Lahore on Thursday.

Price of steel sheets and steel coils have touched Rs55,000 per ton in the open markets as compared to Rs23,000-24,000 two to three months back while price of pig iron, which was available at Rs12,000 two to three months back, is now tagged at Rs25,000.

As a result of shortage and rising prices, he claimed, the parts supplies to tractor makers had slowed down and the assemblers were likely to suffer production fall in the current month.

He said that raw materials were now selling in black market openly as it seems that Pakistan Steel was either manipulating the situation or favouring certain dealers for creating artificial shortage in the markets.

Meanwhile, market sources said that auto makers had urged the car and tractor makers to raise the prices of the parts being supplied to them since both the balance sheets of both the industries had given attractive performance in the last one and a half years. However, car and tractor makers had rejected the demand of PAAPAM on this issue.

Nabeel said that the chairman, Pakistan Steel had been continuously refusing to listen to the grievances of the autopart making industry and despite several reminders for the meeting, the chairman had not responded as yet.

PAAPAM chief claimed that his members had not yet suspended any parts supplies to the car makers. He expressed his concern over the reluctance of the tractor, car and bike makers to acknowledge the price hike of over 60 per cent in raw materials and they are not realistic to this situation.

In a latest development the PAAPAM chief, in a press statement, said that Vice Chairman PAAPAM, Mehdi Ali Rizvi had informed him from Karachi that a number of steel parts producing units had sent communication to their customers, showing inability to continue supply.

Former Chairman Mohammad Saleem and member Razzak Gohar had also said that deliveries of raw materials to the members had either suspended or cut off.

Nabeel said that Pakistan Steel should issue consumer dealership registrations to PAAPAM members to secure the productivity of the engineering sector.

Pricing mechanisms of the Steel mill should be brought under control of the government and sudden price hike without any prior intimation should be checked.

PAAPAM chief urged the government to reduce the import duty on steel raw materials to five per cent to offset the current price rise. He said that India has cut the import duties in the wake of rising international prices of steel products.

An official in Pakistan Steel rejected the claim of auto parts makers regarding manipulation in prices. He said that actually domestic prices had gone up due to rising trend in global prices and commercial importers had also slowed down their imports.

As far as Pakistan Steel prices were concerned, it had gone up owing to rising cost of production on account of surging raw material prices. The mill was currently operating at 97pc production capacity but it could not meet the entire demand.

He said that Steel Mill produces 1.1m tons of steel products annually as compared to local demand of three million tons. The rest of the demand is met through ship breaking and imports but it is not possible for the mill to meet the entire demand.

He said that Pakistan Steel products prices had gone up but the rates, quoted by PAAPAM, did not reflect the actual situation as the association was quoting the open market rate that was not for the mill to control.