KARACHI: Prices of different forms of steel in the country have started increasing as industry players shift the impact on to buyers following recent rupee depreciation against the dollar.
According to brokerage house BMA Capital Research, Amreli Steels has raised rebar prices by 4% or up to Rs4,000 per ton. The new price is Rs107,000 per ton. This is the fourth consecutive increase in prices since February 2018, with a cumulative hike of 20%.
“We see the latest price increase as an attempt to transfer the higher cost from recent rupee depreciation to customers,” BMA Research analyst Faizul Sultan said.
The rupee has depreciated by around 22% since December 2017 against the US dollar.
Following the price increase, the difference between imported steel and locally produced rebar has narrowed to 20%, Sultan said.
He added that the movement in international scrap prices had been nominal since the last price increase in June 2018, suggesting primary margins had remained largely stable.
“Key risks faced by the industry are volatility in scrap prices, further rupee weakness and expected a hike in electricity and gas prices,” he added.
According to Elixir Securities’ research analyst Sharoon Ahmed, the rupee fall had affected the cost of production of all types of steel, but in different ratios.
“Cost of production of long steel which comprises rebar and used in construction, flat steel that is used in the motorcycle industry and tubular steel which is used in pipelines increases following the rupee depreciation,” he added.
“The steel industry is as sensitive as the auto industry to the rupee weakness as both increase prices of their respective products as soon as the rupee falls.”
However, the analyst added that the increase in rebar prices would not harm sales as there was immense demand from the construction industry.
Moreover, some dams are also in the implementation phase, therefore, the price increase will not affect the demand for steel.
