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February 23, 2021

Steel rebar prices feared to cross Rs150,000/ton

Business

February 23, 2021

KARACHI: Steel re-bar prices are feared to cross Rs150,000 / ton after taking cue from $100 increase in scrap rates to $455 / ton in five months in the international market and 10 percent rise in power tariffs, an industry official said on Monday.

“Global scrap prices are set to spike with growth in demand for ferrous scrap in China to 12 million ton a year,” Wajid Bukhari, secretary general of Pakistan Large Scale Steel Producers (PALSP) said. “The increase of Rs4 per unit in the electricity tariff for Pakistan’s nascent steel industry will prove to be the proverbial last straw on its back and detrimental to the government plans for affordable housing for the low-middle-income people.”

“Higher steel prices could jeopardise the government’s plans to encourage the construction sector in general and housing in particular unless it takes immediate measures to help the steelmakers bring down their prices through reduction in their electricity bills and decrease in turnover/minimum tax. The industry needs the government’s assistance on a war-footing to survive.”

PALSP office bearer said this increase is creating crisis like situation for the struggling steel sector of Pakistan. “Tariff change and regime should be reconsidered and properly aligned. In Bangladesh fixed charges are only 70.92 US cents for B4 customer whereas, it is 250 US cents (after recent increase) in Pakistan, meaning the tariffs are over 350 percent of our regional competitors.”

According to Pakistan Bureau of Statistics, the imports of iron and steel scrap into Pakistan rose 13.5 percent in 2020 compared to the previous year with annual iron and steel scrap imports rising to 4.57 million tons from 4.02 million tons.

The industry has long been pleading for cut in the turnover tax of 1.5pc on the steel industry to 0.25pc to provide it a breathing space. “We’ve been pursuing the matter for long and in principal there has been broad consensus that this is an unfair tax on the documented sector, which is already bleeding. The authorities say the issue will be addressed in the upcoming budget, which is not justifiable because it will be too late for the industry by then,” Bukhari said. The government has already slashed through an ordinance the minimum tax for dealers and sub-dealers of sugar, cement and edible oil to 0.25pc whose names are on the active taxpayers’ list issued under the provisions of the Sales Tax Act, 1990 and the Income Tax Ordinance, 2001.”

Another major issue facing the documented steel sector is the tariff anomalies which are creating unfair competition in this sector and making the documented sector to bleed money. For example, the abuse of some concessions given to erstwhile FATA/PATA is resulting in loss of Rs10-15 billion annually to the national exchequer and killing the entire steel sector. Similarly, lacunas in the customs rules allow large-scale tax evasion through mis-declaration of brand new steel as re-rollable scrap.

“In order to make the Naya Housing project a success, the government

should abolish 17 per cent sales tax on this project.”