Ameer Hamza, an analyst at Taurus Securities, said the recent Rs 6,000 price hike has caused the price of boosters to go from Rs 179,000 to Rs 180,000 per ton but will be between Rs 115,000 and Rs 120,000 per ton by September 2020 will. . said it was rupees. Grandstand.
In the statement, the Executive Secretary of the Pakistani Association of Large Steel Producers (PALSP), Saeed Wazid Buhari, emphasized: “
He urged the government to take supportive measures during certain periods of time, such as: For example, the abolition of tariffs and taxes on raw materials, the lowering of the sales tax on reinforcing steel by up to 10%, and the alignment of energy tariffs on exports. Maintain exchange rates at sectoral and existing levels.
He linked the rise in rebar prices with three factors: currency devaluation, rising raw material prices on the international market, and rising electricity prices.
“Currently the national steel industry is selling steel at lower prices than other countries,” he said.
Concerned about the continued decline in the rupee, he said the cost of importing raw materials is higher as the rupee stands at 170 rupees against the US dollar, compared to 157 rupees in July 2021.
“Currency devaluation always increases inflation,” he said, adding that currency fluctuations would send a negative signal to potential investors.
Buhari regretted that electricity prices rose 37% from 12.88 rupees in the same period last year to 17.72 rupees per unit in August 2021.
He stressed that the notice had been issued. This will further increase the rates nationwide by Rs 2.97 per unit from October 1, 2021.
“This adds about 4,000 rupees to steel prices,” he said.
“The government is trying to give the impression that the industry has been saved, but that’s not right,” said Buhari.
The government enacted Article 3 of the 2021 Amendment Ordinance, which lowered the tax rate on imported scrap from 17% to 14%.
He said the news had spread that the government had cut sales tax for the entire steel sector from 17% to 14%, adding that the change was only relevant for steel foundries that import scrap for further processing.
“In other steel industries, including winding machines, traders, etc., sales tax is still 17%,” he said. “Also, input tax is not part of the product cost, so it only affects the mill’s cash flow, not the price,” he added.
With the same ordinance, the government abolished additional taxes that were accidentally collected. “This is a government-corrected anomaly that only affects the pricing mechanism of unregistered customers, not the entire customer base,” he said.
Medium-term for scrap as repairs in flood-hit areas in both China and Europe and the $ 1 trillion infrastructure budget approved by the U.S. Senate could drive scrap prices up. The demand remains bright, he said.
He said the current price of the bar is Rs 171,000 to 173,000 per tonne at $ 505 to $ 510 per ton, assuming the margin remains at the fourth quarter of 2009 levels and the rupee/dollar equivalency at 164 lies.
Saeed Wajid Buhari, executive secretary of the Federation of Large Steel Manufacturers of Pakistan (PALSP), said the scrap import cycle takes two to three months. That month’s scrap arrival was bought for $ 580 a ton in May / June.
“Prices could fall in October as current buying increased at that time,” he said, now on the interbank market at Rs166, where $ 1 was Rs164 last week.
“If the dollar continues to rise in the coming months and then gas and electricity prices rise, the benefits of falling scrap prices in the world market will be lost,” he feared.
Tiles and hygiene:
Amin Rasania, president of the Pakistan Tile and Sanitary Traders Association Association, said prices for locally made sanitary ware have increased by 20 to 25 percent over the past three years, followed by tile prices, which have increased between 40 and 50 percent.
He said the arrival of Chinese investment in tile manufacturing slowed the pace of price increases by local tile manufacturers due to increased competition in the market.
Tile manufacturers have stated that a 50% increase in tile prices is inconsistent with a significant increase in production costs over the past three years as the industry has absorbed most of it.
Gas prices, which make up 30% of the cost of tile making, rose from Rs 600 to Rs 1,087 per mmBtu, followed by prices for raw materials from China and increased by 20 to 30% depending on the exchange rate equivalent, he said.
The official limit of 100 tons to 55 tons has doubled the fees for axle load management. Instead of four, eight skidders with 22 wheels are required to transport the shingles.
Regarding sales tax collection, TI Section 108, and CNIC terms related to unregistered buyers, the third program, launched in 2019, further exacerbated the cost of tile making, he said.
The share of tiles in total housing construction has reached 5% and the majority is led by steel bars and cement, which have seen significant increases in recent years.
“Over the past three years, construction costs have increased by at least 45% given the high prices for rebar, cement, tiles, and sanitary ware,” he said.
After people spend high prices on buying high-quality steel rods and cement for gray structures, people often compromise on tile quality, according to those familiar with the matter.
He said that the market share of local tile manufacturers has increased from 45-50% to 65-70% over the past three years, while the share of imported tiles has decreased to 25-30%.
According to the sensitive weekly price index of August 12, the average daily price of the painter rose from 1,005 rupees on September 6, 2018, to 1,225 rupees, while the bricklayer (raj) was against 1,118 rupees. It will charge 1,411 rupees.
Daily work and plumbers will charge Rs837 and Rs1,258 for Rs635 and Rs966 respectively on September 6, 2018.
Compared to Rs 572 on September 6, 2018, the average price for a 50kg bag of cement per week was Rs 672.
Amplify the rise in cash prices:
International scrap prices rose 22.2 percent CYTD to the current $ 517 per tonne as global demand recovered and economic activity picked up again due to limited supply while the 20-year average per tonne was.
Strong demand for steel bars in China added a boost to scrap prices, and the country lifted restrictions on scrap imports after local scrap prices in China reached their highest level in years.
“Also, the removal of the 13% VAT refund on steel exports and import taxes on steel raw materials shows that China plans to continue large-scale development,” he added.
Investment analysts say Chinese electric arc furnace (EAF) manufacturers are trying to increase capacity in the medium term for scrap through a decarbonization campaign in China (carbon emissions from blast furnaces are higher than EAF). He assumes that the demand will continue to be high. . Europe is also working to reduce carbon emissions.
Great demand to withstand rising scrap prices:
Local steelworks have experienced a significant increase in demand as part of various incentive packages in the construction sector.
She added that demand for derived steels is expected to increase by 18% in fiscal 2009 and 8% in fiscal 2010.
As a result, local actors have to cope with the increased input costs (90.5 percent increase in 2009) through a quick pass (the local rebar price increased 36-40,000 rupees per ton or 36.4% in 2009).
Investment analysts also reflect the scrap price of $ 450-460 per ton, assuming the current bullion price is 150-151,000 rupees per ton and we estimate the margin to remain at the 1SFY21 level.
As the scrap price remains at $ 500 per ton as manufacturers try to maintain the margin, the bar price is therefore at least 2-3 K / t (currently Rs 150-151 K per ton).
However, if the price hike is delayed, local actors may face lower margins in the short term.