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Pakistan's steel industry is beleaguered with many problems and is still in search of its real

potential.
In terms of marketing, although steel is a technical product with traditional influencers such as
civil engineers, contractors and retailers driving the purchase decision, recent ATL advertising
(mainly print ads and billboards) by some players in the industry suggest that end consumers too
are now viewed as part of the marketing cycle. This approach is apparent from recent print and
outdoor campaigns, where brand taglines such as Building for Life (Amreli Steels), Defining
Quality (Agha Steel), Structuring Tomorrow (Abbas Steel), are taking a consumer led
approach, instead of focusing on technical product details.
So is Pakistani steel regenerating itself as an industry?
Pakistans steel industry currently produces approximately six million metric tons (MT) every
year. This market is mainly divided into raw product (iron ore and scrap); flat products (sheets
and plates used in the automotive sector); long products (steel bars, wire rods, rails and
structurals used in infrastructure development), tubes and pipes. However, the industry is not
very stable, as according to the World Steel Association, in 2008, Pakistans contribution to the
global market was 0.1%, yet by 2015 it had dropped to 0.06%. Part of the reason for this lack of
dynamism is the fact that the steel market is extremely fragmented. There are at least 600 big and
small players in the industry, with no clear leaders able to provide direction to the industry.
Although the industry is far from attaining its market potential, some individual players have
seen significant growth in the past three to five years. These include Agha Steel, which started
production in 2013, produced 150,000 tons in 2015 (and aims to double this capacity to 300,000
tons in 2016, the year when the company goes public); Amreli Steels, which had a successful
IPO in October 2015 when it produced 180,000 tons, aims to reach half a million tons in 2017.
International Steel Limited (a subsidiary of International Industries Limited and a public listed
company) sold 463,000 tons and aims to increase this capacity to a million tons this year.
This growth has been propelled by the demand generated by large infrastructure projects such as
DHA City and DHA Oasis, Bahria Town and luxury projects by Emaar Pakistan and increasing
demand in the automotive sector. Another important factor set to fuel growth is the China
Pakistan Economic Corridor (CPEC); this $46 billion mega infrastructure project is expected to
increase demand exponentially.

A huge threat to Pakistans steel industry is Chinese imports. Pakistan has a Free Trade
Agreement (FTA) with China and this means that finished goods are imported at
concessional rates of duty.

Yet, the industry remains cautious. According to Hadi Akberali, Director, Amreli Steels, Steel is
a very capital-intensive industry and when you spend billions of rupees to increase capacity, you
need certainty that there will be continuous demand over the next 10 years a year or two years
doesnt cut it.

He adds that the uncertain security situation results in constant spikes and drops in demand, and
consequently companies hesitate to invest in big plants.
For his part, Riyaz Chinoy, CEO, International Industries Limited says that the government is
pro-trader and not pro-industry. Some of the imported finished products are cheaper than the cost
of my raw material!
Hussain Agha, Executive Director, Agha Steel, is of the opinion that the government needs to
give us a level playing field and a clear roadmap of where it wants to take the industry.
Power shortage is a big concern for local manufacturers; the cost of electricity is the highest in
the region, adding to the challenges of competing with low cost imports and frequent power
shortages, forcing steel manufactures to invest in generators and dedicated feeders.
As Irshad Mowjee, Director, Razaque Steels, puts it I had to invest huge sums in something I
could have used for other investments, such as better technology or capacity building.
Chinoy, whose company has the monopoly in the automotive category, says we generate our
own electricity. We have a gas-fired co-generation power plant that produces ~ 18MW of
electricity and steam and chilled water for free.
In dealing with such issues, the role of bodies such as the Steel Rerollers and Steel Melters
Associations would appear to be key. However, according to Akberali the cement associations
are much stronger than for ours.
This is mainly because the cement market is less fragmented and the number of strong players is
bigger. In steel, says Akberali, the players have different interests and the business model for
smaller players is different; they prefer to import, their labour is mostly outsourced and they
dont invest in expensive technology.
A huge threat to Pakistans steel industry is Chinese imports. Pakistan has a Free Trade
Agreement (FTA) with China and this means that finished goods are imported at concessional
rates of duty (Source: 2015 Directors Report, ISL).
In 2015, China, which produced 823 million tons (about 50% of the total world steel production),
exported a record 100 million tons (Source: Bloomberg), with Pakistan registering as one of their
largest importers. Chinoy adds that while Europe, Australia and America have imposed antidumping duty against China, and even India imposed 50% duty on Chinese steel, Pakistan has
been dragging its feet in its normal style.
There is also some concern about the real impact of the CPEC. Although this is slated to lead to
unprecedented development in infrastructure (consequently an increase in demand for steel),
Chinoy questions whether the Chinese will use Pakistani labour or indeed and more pertinently if
they will opt to import Chinese steel rather than use steel made in Pakistan.
Clearly steel is an industry that is still beleaguered with many problems.
Business recorder: dark and bright side of psm

One would have thought that the role of the steel industry would grow as Pakistan modernises, however,
the industry remains highly fragmented with approximately 600 manufacturing units operating throughout
the country.Downstream industries are suffering, presently, the government should focus on developing
and supporting mini steel mills which require less capital investmentthroughout the country.
While looking at the matters related to the iron and steel industry of Pakistan, it isnotice able that this
sector is presently performing below its capacity despite the immense potential due to a number of
reasons outlined below:
1. Load shedding of electricity and gas which have badly hampered the entire Iron and SteelIndustry that
it held in the process of construction and infrastructure developmentactivities.It is demanded that the steel
industry be exempted from load shedding and curtailment of gas in order to allow the industry to maintain
its sustainability, otherwise the requirement of the iron and steel will be dependable on import which will
not be affordable and affect the balance of payment.
2. Pakistan holds substantial iron ore reserves.However, reasons as to why no government has been able
to tap into the resource remains a mystery. Local raw material procurement would be a blessing to the
country's national exchequer and those who painstakingly import raw materials from countries such as
India, Iran, South Africa and Turkey.
3. There remains a dearth of quality steel products being manufactured locally. The per capita
consumption of steel in Pakistan is much lower as opposed to a global average of 198 kg per annum.This
demonstrates the immense potential that Pakistan has to first become self-sufficient in steel production
and then focus on exporting quality steel products to the world on a similar model to that utilised by China
and India and as a result increase its per capital consumption of steel which is a good indicator of
meaningful infrastructural development.
4. There are different rates of duty for almost similar items, a unified duty on iron and steel items should
be implemented by the government.
5. The state of the art steel mills in the private sector may prove to be more cost effective, requiring less
capital investment and are easier to modernise but there are many hurdles. Shipping companies charge
irrational freight costs which result in hampering the already fragmented steel sector from doing good
business.
6. There is a lack of managerial competence and shortage of skilled professionals in this industry, so far
the technical institutes and universities of the government have not been able to produce steel industry
specific professionals. There is a need to educate and train the workforce on new and modern equipment
in the engineering sector
Despite many challenges and pressures in the past of which a few have been mentioned above, we as a
key and large player in this sector have somehow managedand invested heavily in; strengthening our
human capital by investing in their training and development and have upgraded our internal systems and
standards in order to attract professionals from developed countries and industries. erecting state of the
art manufacturing facilities for producing quality products for the safety of our next generations. exploring
and experimenting alternate methods to catch up with our production and energy needs exploring new
sources of coal and iron ore inside and outside the country.
It would be no exaggeration to state that within our own capacities we have left no stone unturned to cope

with the existing situation prevailing in the country but as a matter of fact, a couple of a large units on their
ownare not sufficient in order to bring any significant economic revival. In order to compete internationally,
a large number of mini steel units need to survive. I must say thatit is nowmanagerial competence and
leadership that we must now seek in this sector coupled with the fact that government need to support
this industry in terms of power supply, standardised duty structure, curtailed freight costs and availability
of raw material not only for the uplift of this sector but economic and infrastructure development of the
country.

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