The long steel manufacturing industry has increased rebar prices up to Rs5,000 per ton with effect from Tuesday, a development that is likely to slow the pace of construction activities which are already under stress due to high inflation.
Citing industry data, Topline Securities’ Senior Research Analyst Fahad Hussain Khan told The Express Tribune “this is the third consecutive increase in rebar prices since the government raised gas prices (up to 193%) last month…with effect from November 1, 2023.”
He said rebar manufacturers had cumulatively increased prices by Rs17,000-18,000 per ton nationwide to pass on the impact of gas price hike to end-consumers.
Giving data breakdown, the analyst said steel makers in the south (Sindh and Balochistan) on Tuesday increased rebar prices by Rs4,000 to Rs270,000 per ton.
Similarly, manufacturers in the north (Punjab and Khyber-Pakhtunkhwa) jacked up prices by Rs5,000 to Rs266,000 per ton.
Khan said the latest round of rupee depreciation and shortage of imported raw material (scrap) for the industry were the other two leading factors that contributed to taking rebar prices to the current high levels.
Read Govt raises gas prices amid Rs2tr loss
He said some of the industries were once again complaining that banks were reluctantly financing imports due to the thin foreign exchange with them, turning the situation grim for the industries dependent on imported raw material like rebar makers.
The situation emerged after the rupee lost 3.33%, or Rs9.55, in recent days and closed at a five-week low at Rs286.38 against the US dollar in the wake of a surge in demand for the greenback.
The analyst recalled that rebar makers had revised down prices by Rs39,000-41,000 per ton during the days when the rupee appreciated around 11% between September and October 2023.
Rebar prices had peaked at Rs287,000 per ton in the north and at Rs294,000 per ton in the south before they were revised down.
Khan said construction activities were already going slow because of high inflation. The latest price hikes may keep the construction industry sluggish with the demand for cement and steel remaining subdued.
He pointed out that cement sales stood low in the first four months (Jul-Oct) of the current fiscal year due to a slowdown in construction work following devastating floods in 2022 that affected one-third of the population.
He added that the cement industry expected demand to grow 5-10% in the current fiscal year over improved outlook for the construction industry on the back of a likely major deceleration in inflation reading.
“We, however, expect cement demand to grow 5-6% in the year, considering the shortage of raw material and elevated inflation will keep hindering construction activities,” the analyst said.
Experts believe that construction and allied industries are the engine of growth in industrial activities. They also create a large number of jobs including in the informal sector.
Published in The Express Tribune, November 8th, 2023.
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