During the Covid-19 outbreak, the Government of Pakistan decided to resume the construction industry and also announced a relief package on construction. After the resumption and announcement of the relief package, everyone hoped for a decrease in construction material costs.
As we were all hoping the construction prices would fall after the ordinance for the Construction relief package, that dream also seems a bit distant now that the local industry has decided to increase the prices of material instead.
Steel prices had already gone up by Rs 11/kg due to no imports and huge demand, but along with steel, the local cement industry has also pulled up its socks. The cement industry has decided to increase its rates by a staggering Rs 60/bag, and before long other materials could very well increase their prices as well. After the increase in steel pricing, we predicted in our video that cement prices would also go up by about Rs 50/-, and today the new rates confirmed that the latest steel and cement rates have indeed increased.
As per the steel dealers in the market, manufacturer companies have increased the prices of all steel sizes to around Rs 120K-121K/ton for Grade 60 in and around Lahore. For Islamabad, prices of Grade 60 steel are also in the range of Rs 115k-117k/ton, up from almost Rs 111k/ton. Since the government announced a lockdown across the entire country on 24th March 2020, factories' production has come to a halt, and since most steel is produced with imported raw material, imports have come to a near standstill due to the overall lockdown in other parts of the world. Due to the shortage in steel stocks and no new production, prices of steel have witnessed a sharp increase. The falling value of the Pak Rupee against the dollar has also contributed to the increase in steel prices.
Despite the lockdown due to Covid-19 across the entire country, and no significant demand for cement at all, a joint meeting of cement manufacturers decided to increase prices by 10.5%.
After the federal committee issued the ordinance for the construction relief package announced by the PM, it was predicted that the overall house construction cost would come down — however, no amnesty or reduction in withholding taxes was given to the cement and steel industries. On the contrary, steel prices were increased by the steel manufacturers, followed shortly by the cement manufacturers.
With the recent hike of Rs 50-60 per bag, cement prices in the region now stand at an average of Rs 500-530 per bag. Cement prices in the southern region remain unchanged for now and are unlikely to be raised in the near term, with the average price already at a premium of 14% against its northern counterparts (an average of Rs 680 per bag), according to an AKD Research report.