Energy Price Hike Crunches Steel Manufacturers of Pakistan
Steel is an electricity and trade-intensive industry. Spiraling costs of energy have forced the giants in steel industries to cut the output across Pakistan, serving as a threat to mass plant shutdowns and some of them warning an alert to be closed permanently.
Owing to these massive costs, the companies are now paying for energy in a month which they used to pay in a year. According to a letter written by the Pakistan Association of Large Steel Producers (PALSP), the steel industry, already struggling under ten-year-high lending rates, has suffered a further setback as a result of recent hikes. The statement continues, "The industry has been getting record high energy prices for stuff that was sold months ago but disguised with arbitrary FCA (Fuel Charges Adjustments) surcharges."
According to the data shared by IEA, the cost of electricity will be $49.9MWH in 2022-23. The graph demonstrates the electricity hike of 22% from the year 2021-22 to 2022-23. This massive hike has affected the steel sector in Pakistan, reporting a crisis-like situation due to rapidly rising raw material costs.
The overall tariff of electricity has increased by 53.68% in a timeframe of one year from 18.20/kWh to 27.97/kWh. Furthermore, FCA’s sky-rocketed almost 10 times in a year’s duration, the last year’s average FCA amount was around PKR 1/kWh whereas, now it’s around PKR 10/kWh. The power tariffs in Pakistan are among the highest in the world that are jeopardizing the domestic steel industry of Pakistan.
The current market situation, where input costs are rising quickly and manufacturers are forced to pass the damage on to consumers, has the steel industry very anxious and alarmed. The steel sector is appealing to the government to facilitate small and giant steel makers rather than creating barriers for the construction industry.
Here, FF Steel manifests itself, as one of the leading steel manufacturers in Pakistan, and sets up a benchmark in the steel sector by introducing its own 132kV Grid stations into two separate units. This initiative of the company will ensure the uninterrupted production of steel bars despite taking into account the power crisis in Pakistan. The company has propped standards for other industrial giants to take into consideration, and synchronize themselves to putting in their efforts to reduce the energy crises of Pakistan.
In these times of adversities, leveraging companies to improve productivity in order to cope with the increasing demand of the construction sector. Major industrial giants need to step forward to look for ways in which they can cope with the overhauling phase with definite solutions.
Citations
- Person, & Blenkinsop, P. (2022, September 23). Steel makers fear deepening crisis from energy crunch as output halted. Reuters. Retrieved November 29, 2022, from https://www.reuters.com/business/energy/steel-makers-fear-deepening-crisis-energy-crunch-output-halted-2022-09-23/
- Person, & Hassan, S. R. (2022, July 26). Pakistan raises power prices amid energy crisis despite rampant inflation. Reuters. Retrieved November 29, 2022, from https://www.reuters.com/business/energy/pakistan-raises-power-prices-amid-energy-crisis-despite-rampant-inflation-2022-07-26/
- Release, P. (2022, August 30). Substantial hike in FCA for Ke: Step termed 'disastrous for steel industry. Brecorder. Retrieved November 29, 2022, from https://www.brecorder.com/news/40194550/substantial-hike-in-fca-for-ke-step-termed-disastrous-for-steel-industry
- report, B. (2022, September 5). FF steel gets another grid station. the news. Retrieved November 29, 2022, from https://www.thenews.com.pk/print/988468-ff-steel-gets-another-grid-station
Article by Arzoo Zaheer