Pakistan: What is the Impact of Budget on Steel Scrap Prices ?

Pakistan’s government declared its FY20 budget on 11th Jun’19 which has been implemented since the beginning of the new financial year on July 1st. The government has imposed a new tax regime in order to do away with the existing complex regime and realise the actual revenue potential of steel sector and support the industry.

Steel scrap prices in Pakistan has observed a jump with Budget's impact is slowly being witnessed in the market.

Being a scrap dependent country for its steelmaking, SteelMint has studied the changes industry went through especially from Remeltable & Rerollable scrap perspective. The study demonstrates below tentative keynotes –

New tariffs on Remeltable scrap increase by net around PKR 9,000 -

-- Sales tax of Rs. 5600 which was adjustable against Electricity bills has been completely removed. Federal Excise duty has been applied instead.

-- Electricity cost has been reduced by PKR 13/unit. Which will amount to a reduction of 9100 PKR/mt (USD 58) in input cost. The government has fixed the electricity use as 700 units = 1 mt for melting.

Has steel billet-making price been altered? Although the duties have been increased, the total cost of making Steel Billet has not changed by much.

-- Electricity cost has been reduced by PKR 13/unit. Which will amount to a reduction of 1430 PKR/mt *(110 units of electricity consumption = 1 mt. This has been fixed by the government).