KARACHI: Swelling freight charges are hand in glove with imported price pressure to send iron and steel scrap prices up 100 percent in the local market since lockdown associated with the Covid-19 coronavirus early this year, people familiar with the matter said on Thursday.
At Port Qasim, price-on-arrival of iron and steel scrap doubled to $500/ton for booking in December from $250/ton in April, industry sources said.
Freight charges due to unavailability of containers have doubled, which is a factor in increased cost and freight rates of scrap, they said. In response to the scrap price pressure, local steelmakers have jacked up rates of their products by Rs7,000/ton.
The global economy is staggering back to normal from coronavirus challenges. In US, hot rolled coil prices have crossed the $1,000 mark for the first time since 2008. Moreover, US rebar prices have also reached to more than an eight-year high to cross $740.
“The domestic steel prices are going up owing to various externalities like supply shocks related to raw material feed and severe scrap collection disruptions over sporadic virus lockdowns coupled with seasonal scrap shortages associated with winters,” said a senior official at Agha Steel Industries.
Agha Steel also raised prices of deformed bars for 10 millimeters and 12-32 millimeters effective from December 30. The prices were increased to Rs135,500 and Rs134,500/ton from Rs128,500 and Rs127,500 a ton, respectively, the official said requesting anonymity.
“Evident dollar devaluation is causing all commodities to enter a bull cycle as they are predominately traded in USD. These factors are not in our control,” added the official.
SteelMint, an online market intelligence company, forecast a further increase in the steel prices going forward and predicted the domestic rates to touch Rs145,000/ton within a few weeks because of the supply chain disruptions and severe scrap shortages caused by lack of container availability.
In the recent years, domestic steel industry of Pakistan has invested to achieve a 5 million ton production capacity that is still underutilized. Currently, the imported rebar cost is $700 CNF from Turkey which would equate Rs200,000/ton inclusive of duties and taxes.
Due to severe domestic competition, locally manufactured reinforcing steel, known as rebars, are trading at a 30-35 percent discount to imported prices.
Agha Steel is going through its second phase of expansion, which will see its steel-bar capacity increase to 650,000 tons a year from 250,000 tons. It has already doubled its annual billet capacity to 450,000 tons during its first phase of expansion.
