KARACHI: Despite the recent drop of the dollar to Rs290.86 in the interbank market, a Rs16.24 decrease in just 14 days, and the decline in scrap prices in the world market, steel bar manufacturers are hinting at another price increase of Rs10,000 per tonne.
In the open market, the greenback is now trading at Rs293, marking a Rs40 decrease over the past two weeks.
A steel bar trader recalled that manufacturers had raised prices by Rs10,000 per tonne last month due to the rupee-dollar exchange rate and an unprecedented increase in energy costs.
Currently, high-quality steel bars are priced at Rs292,000-294,000 per tonne, while another quality is available for Rs286,000-288,000 per tonne.
Tea costs unchanged, retailers await reduction
In July-August 2023, Pakistan imported 391,703 tonnes of iron and steel scrap ($185 million), compared to 440,185 tonnes ($258m) during the same period in 2022, resulting in a drop in the average per tonne (APT) price from $587 to $473 during the mentioned period.
General Secretary of the Pakistan Association of Large Steel Producers (PALSP) Syed Wajid Bukhari, without mentioning any positive impact of the low landed cost of imported raw materials due to the rise of the rupee and the drop in world iron and steel scrap prices in July-August 2023, warned of an imminent price surge of Rs10,000 per tonne. This surge is attributed to skyrocketing energy costs, which could jeopardise the backbone of Pakistan’s economy and potentially lead to widespread layoffs.
The steel sector heavily depends on electricity as a primary input, where power costs make up over 50 per cent of production expenses. The adverse effects of rising electricity prices have already led to the closure of several steel bar manufacturing units, leaving the operational ones running at a fraction of their capacity.
He said PALSP has consistently appealed to the government for reduced electricity rates for the steel industry, promoting maximum capacity utilisation instead of incurring payments to independent power producers (IPPs) for unused electricity.
In FY24, consumers would collectively bear an enormous burden of Rs2 trillion in capacity charges, a burden exacerbated by the presence of idle power plants. The industry faces the harsh reality of poor agreements with these power plants, which stipulate that capacity charges must be paid even if government utilities fail to draw electricity from them. The National Electric Power Regulatory Authority (Nepra) has recently hinted at an increase of Rs3.28 per unit in electricity rates for all consumers nationwide.
Currently, the average base tariff stands at Rs29.78 per unit, which further increases to Rs50 per unit after factoring in taxes and additional charges.
Similarly, tea packers and loose tea dealers had increased prices by Rs100-200 per kg in August citing the weakening rupee. After the depreciation of the dollar’s value, retailers have noted that there is no indication from the distributors of the companies regarding any price reduction.
A tea importer/trader mentioned that prices have not been reduced yet, as rate adjustments typically take a few months. Larger companies typically maintain stocks for two to three months, allowing market stakeholders enough time to deplete their old inventory.
Published in Dawn, September 26th, 2023