Construction — a costly ride as prices of key inputs surge

Published August 7, 2021
Manufacturers have raised steel bar prices by up to Rs57,000 per tonne since November 2020 when the rate was hovering at Rs110,000-113,000 per tonne. — Reuters/File
Manufacturers have raised steel bar prices by up to Rs57,000 per tonne since November 2020 when the rate was hovering at Rs110,000-113,000 per tonne. — Reuters/File

KARACHI: The construction cost continues to surge as a leading manufacturer has further increased steel bar prices by Rs5,000 per tonne followed by a rise in cement prices in the country’s northern region in the last one week.

Amreli Steels Ltd (ASL) has informed its business partners regarding a jump of Rs5,000 per tonne in the booking rate to Rs167,000 and Rs165,000 of two qualities with effect from Aug 6, citing continuous increase in raw material prices.

Manufacturers have raised steel bar prices by up to Rs57,000 per tonne since November 2020 when the rate was hovering at Rs110,000-113,000 per tonne.

Steel bar now sells at Rs167,000 a tonne

Tahir Abbas, Head of Research at Arif Habib Ltd (AHL), said average cement price in the northern region has risen by 3.5 per cent to Rs666 per 50 kg bag from Rs644 in the last one week. However, the highest rise of 6.3pc was witnessed in Bannu where the bag now costs Rs670 as compared to Rs630 followed by 5.1pc and 4.6pc jump in Islamabad and Lahore to Rs667 and Rs680 versus Rs635 and Rs650 per bag.

He said the average price of cement in most of the cities of southern region held unchanged at Rs674 per 50 kg. However, price jump of 1.1pc was recorded in Larkana in the last one week to Rs637 from Rs630. In Karachi, retail price is tagged at Rs695, while in Quetta and Hyderabad, the bag costs Rs700 and Rs690, respectively.

Mr Abbas attributed cement price jump to rising coal prices which have doubled in the last one year. On stable price in southern region, he said there are different demand dynamics in both the country’s region followed by contrasting market size.

Prime Minister Imran Khan has been holding weekly meetings of National Coordination Committee on Housing, Construction and Development in Islamabad with all the stakeholders for the last over one year but so far no steps have been taken to bring down the prices of steel bars and cement.

Pakistan Association of Large Steel Products Secretary General Syed Wajid Bukhari told Dawn that the steel bar prices were rising due to three factors. One of them is soaring dollar price which is now equal to Rs164 as compared to Rs158 in the last few months in the interbank market.

Secondly, he said increase in RLNG gas prices by 20pc has been made in latest utility bill. Thirdly, the Federal Board of Revenue has increased minimum value of bars from Rs83,000 to Rs140,000 per tonne for charging general sales tax to recover more taxes from the steel sector.

Former chairman Association of Builders and Developers of Pakistan Hassan Bakhshi said the cost of construction on a high-rise project has surged by 20-25pc keeping in view a massive rise in steel bar prices in the last one-and-a-half years when steel bar price was Rs100,000 per tonne.

Steel bars hold 40-45pc share in total construction cost of a high-rise project. The cost of housing project has also soared by 20pc in the same period.

He said the government must take measures including allowing imports to bring down steel bar prices otherwise the dream of providing low-cost housing to the masses under the Naya Pakistan Housing Scheme would not be materialised.

Published in Dawn, August 7th, 2021

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