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Soaring cement, steel prices hit construction in Pakistan

Internews Report

KARACHI: There is substantial increase in steel bar prices in the Pakistani market, while enhanced activity in the construction sector has made prices of cement moving up again.

Many consumers paid Rs45,000 per tonne for steel bars made of ship plates two months back, now it is priced at Rs66,000 per tonne. Similarly, steel bars made of billets produced by Pakistan Steel now cost Rs70,000 per tonne. The same was selling Rs15,000 less two months back.

Many dealers, holding old stocks of steel bars, are said to be making fabulous profit after meteoric price hike. Similarly, the price of 50 kg cement bag had also gone up by Rs10-15 in the last one and a half months.

The stakeholders had smelled surge in demand of these items as the construction activity, after a lull in winter, is now gaining momentum. A number of people are engaged in renovating their houses, besides improving the front alleviation. Many people, who purchased old houses, have demolished them to build them with latest designs.

Central Chairman of Association of Builders and Developers (Abad), Farooq Zaman and zonal chairman Salim Patel said that the composition of steel in an apartment project (ground plus seven) ranges between 30-40 per cent of total project cost, while its share in ground plus three to four apartment projects hovers between 15-20 per cent.

The massive increase in steel price has definitely raised the construction cost by at least 10 per cent, they claimed.

They said the share of cement in any project is estimated at 15 per cent of the total project cost. For example, a cement bag now costs Rs290 as compared to Rs270 two months back. The increase in construction cost on account of slight hike in cement price ranges between two to five per cent. They said there is an option of escalation clause in which the builders can seek rise in cost of production from the Karachi Building Control Authority (KBCA).

Many builders having goodwill in the market usually avoid seeking escalation clause as they believe customers would lose confidence in them. Besides, construction work had also been initiated by the builders, who had launched around 35-40 projects of small apartments since Ramadan last year.

It has been observed that the construction work in many projects, whose structure had been completed, had been suspended by the builders. Besides, many projects were seen with construction of ground plus two to four floors but no further work had been undertaken for at least a month.

Zaman said that there are other reasons for holding up the construction activities like suspension of payments from customers or some kind of loan problems. Surging steel bar and cement prices must also have pushed up the construction cost of public sector projects by at least 10-20 per cent in the last two months.

He said the government has yet to take any action against the producers of cement and steel bars over persistent increase in their prices. The Steel Mill is increasing prices without any reason in order to cover up their previous losses.

Chairman Karachi Iron and Steel Merchants Association Shamoon Baqar Ali said that sale of steel bars has declined. He said many people, who had planned construction, have adopted a wait-and- see posture, while builders, who just started construction and those who have completed six floors have also slowed down lifting of steel bars for next floors.

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