Consumer is being battered by the soaring prices as industry fails to observe the sanctity of trade practices. The government is still in the rhetoric stage in its efforts to stablize prices.
Consumers are awaiting measures for positive outcomes.
With increase in prices of cement, steel and other building materials in the wake of wheat shortage and rising inflation, those building small houses are now facing a mind-boggling crisis. And contractors complain that sky-rocketing prices are threatening the financial viability of many on-going construction projects and the wage earners's livelihood.
It is stated that the skyrocketing prices of steel products in markets have forced the contractors and builders to suspend or slow down their on-going projects. "We are waiting to see prices return to affordable levels following the federal government's decision last week, to allow import of re-reliable scraps and cut duties", a contractors representative informed Dawn.
The government has also agreed to reduce import duties on iron ore, cooking coke, balls and coils in addition to some sales tax relief. Since there are no restrictions on the import of billets by the Pakistan Steel (PS) or the private sector, the PS has been directed to take immediate steps to import the billets.
The PS, a producer of billet will, for the first time,import billets carrying a duty of 10 per cent. It has also been proposed that the import duty on iron ore and cooking coke raw materials be brought to zero level from five per cent. Coil is also a PS product on which import duty is 25 per cent. The PS wants the government to keep duty on billet import at 10 per cent.
When the official decisions were announced, the prices of steel products saw a fall of Rs4,000-5,000, indicating that an artificial shortage was created to make windfalls.
The government's has yet to announce tariff rates and imports will take some time. Construction industry is waiting to see how official decisions would offset the impact of rising prices of steel products in world markets and manipulation of prices in local markets.
The PS has attributed the skyrocketing of steel prices to global scarcity and drastic rise in the cost of raw materials. China, earlier an exporter, has picked up about 70 per cent of the raw material supplies in the global markets. As a result the freight charges have also gone up by over 100 per cent.
The PS claims that the prices of its products were raised when extremely essential. It further claimed that the prices of steel mill products were far lower than those prevailing in the global market.
Based on the figures of the Metal Bulletin, the landed price of imported billet, pig iron, hot rolled coil and cold rolled coil were Rs30,114, Rs20,317, Rs41,656 and Rs45,513 per metric tons as compared to Pakistan Steel's prices at Rs28,500, Rs18,700, Rs32,000 and Rs36,000 respectively.
An high official in the PS thinks that the availability of products in world markets is a more significant problem than the price issue. Currently global markets are facing the steel shortage. In Pakistan,out of total four million tons annual steel requirements, the PS has a share of 25 per cent only.
The local contractors and the construction industry appear confused over the government move. "If only the PS has been empowered to import steel products a monopolistic situation will again emerge," Chairman Association of Builders and Developers (Abad), Babar Mirza Chughtai says.
Prices will stabilize if the private sector is asked to import steel products freely, is the consensus in the industry. Contractors fear that work on all the on-going projects may come to a standstill due to a phenomenal jump in steel prices to Rs55,000-60,000 from Rs20,000 per ton in six months.
On an average steel and its products consist of 35 per cent of construction cost of any housing unit. The cumulative impact of jump in steel and cement prices makes a difference of Rs250 per square feet in any of the construction project, Babar says.
The Monopoly Control Authority (MCA) has totally failed in controlling the steel prices. It is the prime responsibility of this department to monitor the prices of commodities and take remedial measures to curb any malpractice in the market.
Contractors say that they are reluctant to quote the price for new projects till the prices of steel products stablilizes at normal level. An official in the All Pakistan Contractors Association (APCA) says that the work of majority of contractors have been suspended due to price hike.
He says that the price decline and the availability of steel in coming months will much depend on the proposed changes in duty structure on import of steel products.
The Pakistan Ship Breakers Association (PSBA) feels that the government should have given incentives to other sectors responsible in fulfilling the country's requirement of steel products.
A PSBA spokesman says that the share of ship breakers in producing country's total requirement of steel products has declined to only 400,000 tons per annum out of total four million tons per annum. Few years back, this industry used to provide 600,000 tons per annum when the total country's requirement was two million tons.
Currently the ship breaking industry is in the midst of a crisis since the rates of ships (small to large size) in world markets have climbed up to $350-400 per tons as compared to $200 per ton six months back. A year and a half back, the rates ranged between $125-150 per ton. Currently, only five to six ships are at the Gaddani ship-breaking yards as compared to 15 in normal days as against 100 ships a decade back.
It is not feasible to import ships for scrapping unless the import duty and sales tax are either curbed or removed to offset the impact of higher rates, reckon ship-breakers..
Auto parts makers have already lodged their protests against the rising steel prices by blaming the Pakistan Steel for manipulating the situation or favouring certain dealers for creating artificial shortage in the market. Many parts makers have suspended their production, besides closing down their shifts and foundries owing to raw materials' high rates and shortage, according to vendors.
Industries, dependent on steel products lament that the high-ups in government have always kept the interest of the PS above the larger interest of the industry.
The decision on steel imports looks quite an exact replica of the government's move to send a new wave of commotion in the market as it did in the auto sector by approving import of used cars and new cars, leaving the stake holders, dealers and importers fighting each other.
An analyst at the Khadim Ali Shah Bukhari Securities says that Pakistan is passing through its worst times in terms of the sanctity of trade practices. Name any industry and Pakistan appears to be setting standards of forming inefficiencies.
Auto, cellular telephony, steel, synthetic and cement are just some of the names. Despite hue and cry from the general public, the Musharraf government has miserably failed in checking such practices.
