KARACHI: Steel bar and flat products stakeholders are perturbed over slowdown in sales during July to August saying that most of the projects in public and private sector have been on hold coupled with rising prices of long and flat products.

Former Senior Vice President, Karachi Iron and Steel Merchants Association, Mohammad Saeed Shafiq said sales of flat iron and steel products are down by at least 25-30 per cent in the last few months owing to shrinking demand coupled with 40pc increase in prices in the last one year because of massive rupee devaluation against the dollar.

Besides, the government had also imposed regulatory duties and anti dumping duties on flat products. “Market situation is uncertain after Budget 2019-20 especially after CNIC condition,” he added.

He said flat products are used by auto industry, water and oil tanker makers, pipe makers etc. Auto sector is also facing sales crisis.

A dealer in Sarya Market, who asked not to be named, tells Dawn an even more dire version. According to him, sales of steel bars in July and August have plummeted to almost 10pc of what they used to be.

“We keep waiting for the buyers to arrive,” he says citing very high price of steel bars coupled with thin demand from the contractors and builders.

National Steel Advisory Council General Secretary Irshad Mowjee said at present inflation has eroded all margins and no company is making profits. Gas prices have increased by 30pc and the rupee devaluation has taken its toll as lots of inputs are import based. “Due to investigations by the National Accountability Bureau (NAB), the government work has come to a standstill,” he adds.

When asked on what strategies steel makers are using for their survival in this difficult time, he says “it is very difficult for big businesses to curtail production as fixed costs are huge and closing down production is not feasible.

“We have to continue production and stocks are piling up. If this continues then we will be forced to cut production.”

Financial costs are very high due to rising interest rates. “The industry is now hoping for some uptick once major projects like Naya Housing scheme and high-rise projects start that could boost construction activity,” he says.

Gadani, which was supplying raw materials to a lot of small rolling mills, has become uncompetitive, leading to the closure of some small mills in Sindh and Balochistan. However larger units, that have more staying power, are living on the hope that things will turn around, Irshad says.

At present FBR laws are giving confusing signals to sector. One such law is that imported steel for special projects can be imported free of sales tax. But local manufacturers are not allowed to claim input adjustment on their purchases against supply of goods that are exempted from sales tax. This forces them to make these adjustments out of pocket, which makes it uneconomical to sell exempted goods, industry leaders tell Dawn.

Further, customs valuation of scrap for all duties is $360 per tonne whereas the international market is $300, they claim. “Many representations have been put by the Steel Melters Association for reduction of these values over the last six months, many meetings have been conducted with no result,” they claim.

He says a senior bureaucrat in the Customs Valuation department confessed to him that whilst the case is genuine but taking a decision where government revenue would be lost is something he is not prepared to do as he does not want the NAB to come after him. The industry is perturbed as the government is not listening to the genuine concerns.

Published in Dawn, August 29th, 2019