Construction Costs Concerns

Builders were very happy a few months ago when the government announced a construction amnesty that meant a relaxed tax regime and waivers for new housing and construction projects. They are not too happy today. Hasan Bakhshi from the Association of Builders and Developers (ABAD) claims prices for steel rebars have gone up by Rs18,000 per ton over the last 1.5 months due to the “cartelization” of key steel bar players like Amreli, Agha, Naveena and so on. who are raising prices amid booming demand. Steelmakers, on the other hand, cite the increasing cost of raw material—primarily imported scrap—to be the primary cause of price increase.

Both assertions are—in their own way—accurate. Steel scrap prices have increased in international markets (see graph), hitting a new peak as global supply disruptions, logistical challenges leading to port congestions and high freight are causing prices to catapult out of control. Between Dec-20 and Apr-20, prices of steel scrap are up by $154 per ton. The start and end of this year have seen country wide lockdowns in the first and second waves of covid-19, particularly in countries that are exporting steel scrap, such as the European Union.