According to Mining News Pro -With major steel players in the industry coming up with expansion plans, additional steel capacity of 1.7 MnT is expected to come online by mid-2019. The project cost is estimated to be around PKR 15 billion on the rising domestic demand. This would augment the local steel production capacity to 4.5 MnT from the current 2.8 MnT capacity.
Rising investments in country’s construction sector - The domestic steel industry is benefiting from an encouraging investment and operational stimulus. However, as the new capacity comes online, the profitability of the manufacturers would depend on the overall activities in real and construction sectors going forward.
Cumulatively, the domestic manufacturers cater around 50% and 60% of the total domestic demand for galvanized and cold rolled coil (CRC), respectively.
Dumping through imports remains a major challenge - Arsalan Ahmed at JS Global Capital said despite enjoying a high degree of protection via customs, regulatory and anti-dumping duties given to local players, dumping remains a major challenge for the flat steel industry in Pakistan. “Amid US tariff increases, local flat steel producers’ volumes have been suffering from dumped imports that are available at significantly higher discounts now than in the recent past.”
The favorable interplay between the demand and supply dynamics has incentivised the domestic industry to invest in capacity expansions and product diversification.
International Steel aims 1 MnT CRC production - International Steel, for instance, increased its CRC capacity from 250,000 MT to 550,000 MT during FY15 and FY16 after converting their compact cold rolling mill to a twin-stand reversing mill. Similarly, their galvanising capacity increased from 150,000 tons to around 460,000 MT after adding a second galvanising line. They are currently in the process of upgrading their CRC capacity from 550,000 MT to 1.0 MnT at an estimated cost of PKR 5.6 billion.
Amreli Steel observes diversification in its product base - Amreli Steels has diversified its product base, producing billets as well as re-bars. Their capacity for rebar production planned to grow from 180,000 MT eventually to 750,000 MT and for billets from 100,000 MT to 600,000 MT.
Aisha Steel plans to produce CRC & galvanised products - Aisha Steels is also expanding its operations vertically. It plans to produce galvanizing products as well as CRC. An investment of PKR 3.9 billion would take its capacity from 220,000 MT to 450,000 MT for CRC while introducing new capacity of 250,000 MT for galvanized coils.
Lastly, Mughal Steel is ramping up total capacity from around 690,000 MT to 1.0 MnT. Meanwhile, some players are enhancing their own electricity production capacities to cater to the growing demand.
Ferrous scrap imports to Pakistan to increase further - Amid increasing steel capacities, ferrous scrap imports to the country have also moved up. Imports are expected to reach 5-6 MnT in FY18 compared to 4-5 MnT in previous fiscal. The industry players have started expanding their billet manufacturing, which was being further processed into long bar products by the manufacturers. The sector is also intensifying efforts to reduce import dependence on raw materials.