The production of the steel industry of Pakistan has shown a decline of 60% in recent months owing to various internal and external factors, WealthPK reports. The recent devastating floods in the country and the ongoing Russia-Ukraine crisis can be cited as major reasons for many financial challenges faced by industrialists and traders in Pakistan. Talking to a delegation of industrialists and traders, Meher Kashif Younis, Coordinator to Federal Tax Ombudsman, said the local steel industry witnessed a contraction of around 60% due to the recent devastating floods.

The delegation of industrialists was led by Mian Faryad Ahmad Raza. Kashif Younis said that many steel plants stopped production due to the high cost of scrap laced with other multiple economic challenges. He said that global scrap price also swelled by about 30 % and reached $710 per tonne as a result of the Russia-Ukraine conflict. The increase in energy costs and fuel charge adjustments (FCA) of Rs9.5 per kwh and Rs11 per kwh also affected the profit margins of industrialists.

Super tax expense of Rs509 million along with FCA charges of Rs834 million also badly affected the bottom line. “Due to the flash floods, most steel companies saw around a 40% to 50% decline in the volume of production. Reduction in demand also put pressure on the pricing power of steel makers. The decline in demand seen is a result of the overall slowdown in construction activities nationwide, following record high-interest rates and inflation, plus the soaring costs of input,” said Kashif Younis.

He said that the sale of steel is directly related to that of cement. The trend of cement sales in the country is a reasonable indicator of the trend in the steel sector. “This is the first time in 75 years that, due to the non-availability of funds, the government has redirected all funds to finance the massive budget deficit.

As a result, all the government projects have not been kicked off,” he said. Kashif Younis urged the government to announce a package of incentives to help accelerate the pace of economic activities involving all sectors of development and take tangible measures to strengthen the national economy. He said that a sound and stable economy is a panacea to all problems confronting the nation in the wake of flood wreckage.

Credit : Independent News Pakistan-WealthPk