Prices of basic material – steel and cement -for the construction industry are expected to remain high across the countryfollowing the extension of incentives by the government.

Pakistan’s cement sales in the second quarter offiscal year 2020-21 touched an all-time high of 15.1 million tons, up 11%quarter-on-quarter as well as year-on-year, according to a report of ToplineSecurities.

In the first half of FY21, cement sales rose16% year-on-year to 28.6 million tons, it revealed.

“Cement prices will register a further hike ascapacity utilisation is increasing robustly,” Topline Securities’ Deputy Headof Research Shankar Talreja told The Express Tribune. “The power to influenceprices is with manufacturers at present.”

Industry utilisation based on total sales camein at 91%, adjusted for closed capacities, in the second quarter (Oct-Dec) ofFY21. Based on just local sales, the utilisation stood at around 77% with 86%in the northern region and 48% in the southern region.

The strong growth in cement sales could beattributed to economic recovery in the face of low interest rates, announcementof a construction package, allocation of banking sector liquidity to theconstruction and housing sector and beginning of construction of dams, he said.In the last three months, housing loans increased by Rs43 billion, he added.

“During the outgoing quarter, coal pricessurged to an average of $60 per ton compared to $55 per ton about six monthsago,” he said. “As a result, fuel cost per ton for major cement companies is expected toincrease by 10% quarter-on-quarter.”

To pass on the impact to consumers, the cementproducers hiked prices in December 2020 by around Rs20 per bag in the north toRs570. JS Global analyst Arsalan Ahmed told The Express Tribune that steel priceswere on the rising trend.

Pakistan Large-Scale Steel Producers (PALSP)Secretary General Syed Wajid Bukhari said due to shortage of scrap globally,its price had risen above $500 per ton and as a result, rebar rates wereincreasing in Pakistan. “Local companies, however, are working at margins ofless than 5%,” he said.

He added that Pakistan was almost totallydependent on imported raw material for producing steel and requested thegovernment to take urgent measures to contain the impact of price hike on themega infrastructure projects as well as other ongoing construction projects.

The industry suggested to the government toremove sales tax for some time and reduce the cost of electricity to offset theimpact of soaring raw material prices, which was a global phenomenon, he said.

However, the government did not take anymeasures to address the situation, he lamented.

“We believe that the steel sector has beenignored as it is not receiving much-needed attention from the government,” hesaid.

Recently, the demand for steel picked up butmargins remained very low and most of the large units were working at 50-60% oftheir capacity, he said.

“Inrecent months, steel prices have increased by 55% in India,” he said. “In theUS, prices are likely to touch $1,000 per ton, which is twice the rate beingcharged a few months ago.”