March 24, 2007	Saturday	Rabi-ul-Awwal 4, 1428

KARACHI, March 23: Steel prices have soared by 16 to 19 per cent per ton in the local market during last two months affecting the ongoing infrastructure and development projects being largely undertaken by the public sector.

Some housing projects being carried out by the private sector have also been affected.

The spurt in prices of steel products of different qualities and grades is reported to be in corollary with world prices where billet prices scrambled by 37 per cent since the beginning of the year. The growing demand of steel for infrastructure projects and higher consumption by China ahead of Olympics 2008 have been major factors behind surge in steel prices in the world market.

In the domestic market steel prices have risen by 19 per cent for twisted bars now being quoted between Rs44,500 to Rs45,500 per ton as against Rs37,500 to Rs38,500 per ton in January 2007.

Similarly, deformed bars of grade 60 became dearer by 16 per cent during this period (Jan-March) after moving up to Rs47,000 to Rs48,000 per ton from Rs40,500 to Rs41,500 per ton about two months ago.

The billet prices in the world market, which were being quoted in the range of $420 to $450 per ton (C&F) in January this year, have now moved higher between $575 to $610 per ton showing an increase of around $155 to $160 per ton or 37 per cent.

During this period Pakistan Steel increased its billet prices twice to bring the net impact of Rs3,800 per ton or 13.5 per cent from Rs28,500 per ton quoted early this year to Rs32,300 per ton. However, this indicates that prices in the domestic market did not increase to the level of price rise in the world market.

The sluggish demand for steel in the domestic market is being considered due to slow activity in housing projects where real estate prices have came down on poor response from buyers, who are confronted with rapidly increasing cost of living, particularly of essential commodities.“One cannot think of buying a shelter if he/she is bogged down with ever- rising daily expenses of kitchen and school fee of his children,” lamented a leading builder. Above all, rapid increase in steel prices upset the project estimates and builders are reluctant to take any mega project at this juncture.

The landed cost of billets stands at $590, which comes to around Rs41,600 per ton at the current rate of five per cent customs duty and 15 per cent sales tax. However, if duty and sales tax are removed it will help to bring down the price of billet to Rs36,000 per ton and in return steel prices will also come down by around Rs6,000 per ton.

The industry is also demanding that import of billet should be allowed from worldwide sources, including India and delay in decision-making would result in further escalation of prices of steel in the country. This will further retard economic growth as construction industry would suffer immensely and would aggravate unemployment problem for skilled and unskilled workers.

There is a need of importing quality steel billets, which could meet specific standards of mega infrastructure projects such as dams, bridges, high-rise buildings and earthquake zone buildings.

Hafiz Butt, chairman Association of Builders and Developers (Abad) told Dawn that since steel had a major impact on projects cost, therefore, his association had already taken up the issue with the Minister of Industries Jahangir Khan Tareen and the Monopoly Control Authority to find out reasons for price escalation.He further said that for a housing project with ground plus four stories the impact of steel came to around 18 per cent and for multi-story buildings the cost component of steel increases between 23 to 25 per cent. Therefore, Mr Butt said that an increase in steel prices is a major concern of builders.

The Abad chief said that the minister for industries had asked the Monopoly Control Authority to find out whether price escalation of steel in the domestic market is artificial for making profits or is influenced by the world market.

However, he said in any case price escalation in steel do not only upset the costing of on-going projects but also results in higher cost of upcoming projects.