Construction cost to go up

KARACHI: Steel bar prices have touched new peak of Rs109,000-110,000 per tonne from Rs96,000-97,000 tonnes following rupee devaluation against the dollar. Meanwhile, market players anticipate more price shocks from July 1 owing to increase in taxes and duties imposed on the steel sector in budget 2019-20.

Builders estimate a 35 per cent jump in the cost of construction in the last one-and-a-half months in view of rising steel, cement and other construction related material prices.

Director Razaque Steel, Irshad Mowjee said that two months ago steel bar prices were Rs97,000 per tonne and the key construction material was being sold below cost. However, prices increased to Rs102,000-103,000 just few days ahead of budget 2019-20 since many units had closed and a lot of mills went into maintenance, he said.

“Now steel bar prices hover between Rs108,000-110,000 per tonne due to rupee depreciation against the dollar and increase in utility bills,” he added.

Prices of key inputs including steel and cement rise

Mowjee estimates that a further jump in steel bar prices after 17pc FED is expected to take effect from July 1 onwards.

The larger units have to operate as it’s uneconomical to close down, however, a number of small steel bar makers have shutdown for the last two months since they were finding it difficult to sustain under intense competition, rising cost of production and surge in ship plates, he explained.

Steel bar sales have been depressed following low demand from builders and contractors.

Another major issue the industry would face is switching over from Special Procedure to 17pc FED on GST mode as there are no clear guidelines on how this would be implemented by the government.

Discussions with the stakeholders need to take place on an urgent basis to smooth out the process, Mowjee added.

Chairman Association of Builders and Developers (Abad), Hassan Bakhshi said builders were procuring steel bars at Rs96,000-97,000 per tonne one and a half month back as compared to current rate of Rs109,000-110,000 per tonne.

“The steel sector has intimated us for up to Rs120,000 per tonne price from July 1 onwards after implementation of new taxes on steel sector,” he added.

Bakhshi claimed that cement makers had also raised prices by Rs30 per 50 kg bag before budget on account of rising transportation charges. A cement bag would cost Rs20-30 more after implementation of enhanced federal excise duty from July 1, he added.

Steel bar and cement hold 35-40pc and 10-12pc share in a high-rise project cost while in houses, steel bar’s share is 20-25pc of total construction cost. The share of cement hovers between 10-12pc in houses.

A dealer at Sarya Market said rates of steel sheets have also increased by Rs3,000-4,000 per tonne in the last one month.

Country’s import of iron and steel scraps fell to 3.929 million tonnes ($1.22 billion) in July-April 2018-2019 from 4.448m tonnes ($1.3bn) in same period last fiscal.

According to Pakistan Bureau of Statistics (PBS), import of iron and steel plunged to 2.654m tonnes ($1.83bn) in July-April 2018-2019 from 3.137m tonnes ($2bn) in same period last fiscal year