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Monday, May 20, 2024

Steel rebar prices threaten PM’s Naya Pakistan Housing

The upwards rally of international steel prices continues to impact the steel manufacturing in Pakistan, as Amreli Steel announces a further increase in prices of steel rebars in Pakistan. This continuous increase in prices may deter PM Imran Khan's plans for the provision of low-cost housing to the poor of Pakistan.

The rise in international steel prices has started to impact Pakistan’s steel industry, as Pakistan’s leading steel rebar manufacturer Amreli Steels has increased the price of rebars by Rs6,000 per metric ton (MT).

The manufacturer revealed this in a message to its relevant retailers recently, adding that the new ex-factory booking rates are Rs173,500 per MT and Rs171,500 per MT for deform and Xtreme rebars.

It is worth mentioning that the international market has seen an exorbitant price hike in steel rebar since 2020. The graph below shows the price change in steel rebar in Chinese Yuan/MT

Steel rebar prices


According to American multinational business magazine Fortune, the steel prices are up 219 per cent since early 2020. The magazine report says that prior to the COVID-19 pandemic, it traded in the $500 to $800 range, and now as of 13th August, the prices had hit $1880.

The average price of steel scrap, the main raw material for making steel, increased 79% from $299 in August 2020 to $535 in August 2021, due to supply chain disruptions caused by the ongoing pandemic, slimming the companies’ profit margins.

National media agency Tribune reported that the unstable demand correction post-lockdowns and port jams in many countries have driven scrap’s price upwards. This has led to increased freight and ultimately input costs for the local companies in Pakistan.

In addition, the report added that as the imported scrap has become unaffordable for ungraded long steel players in Pakistan, the price gap between graded and upgraded long steel products has narrowed, and as a result, the demand for graded long steel products is going up.

Read More: LDA City Naya Pakistan housing inaugurated, people can now own houses

Analysts, however, believe that Despite the sharp increase in input costs (+20%YoY in FY21), the local long steel manufacturers including Amreli Steel will remain in the limelight as strong local demand improves the ability of these companies to pass-on costs (rebar prices increased 11%YoY in FY21).

However, Tribune quoted the Pakistan Association of Large Steel Producers (PALSP) Secretary-General Syed Wajid Bukhari saying that the capacity utilization is 70% and most units are operating below their maximum capacity as steel demand is still lower than that of 2017-2018.

Impact on Naya Pakistan

The impact of the rising input costs has to have a significant impact on the Naya Pakistan Housing society.

It is worth mentioning that PM Imran Khan has been holding weekly meetings of the 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.

In a high rise project, steel bars hold 40-45 per cent share of total construction cost, and similarly, the cost of housing project has reportedly increased by 20 per cent, meaning that the housing construction will become more expensive, as steel prices increase.

It is worth mentioning that reports earlier in the year showed that the government of Pakistan has been working with Henan D.R. Construction, or Easy Prefabricated Homes (Private) Limited, the name under which it is registered in Pakistan, to produce low-cost prefabricated homes for the Naya Pakistan Housing Scheme.

With their advance in technology, Henan D.R. is offering walls made of cold-form steel slabs and reinforced Styrofoam sheets. Thick, sturdy, and as tough as nails, these houses require no bricks and no cement, are easy to assemble, and more importantly, are quick and cheap to assemble as well.

The fact that the low-cost house built by Henan D.R. is going to be largely based on steel, the increase in steel prices will impact the prices of the houses built by the government.

Read More: Is the promise of Naya Pakistan Housing still standing?