Pakistan is the World's Fastest Growing Steel Producer

Steel production in Pakistan jumped 39.3% to 5 million tons last year, according to World Steel Association. Earlier, Pakistan steel industry ramped up its output from 2.9 million tons in 2015 to 3.6 million tons in 2016.

While Pakistan's steel production growth is the world's fastest,  its relatively small steel production volume of 5 million tons ranks it 28th in the world. Other nations seeing strong growth in steel production are Iran (up 21.4%), Vietnam ( 31.9%) and Egypt (35%).   Iran ranks 13th with 21.7 million tons; Vietnam ranks 19th with 10.3 million tons; Egypt ranks 23rd with 6.8 million tons produced in 2017.

Some of the key names ramping up production capacity in Pakistan are Aisha Steel Mill (ASM),  Amreli Steels and Agha Steel Industries.

ASM, an Arif Habib Group company, is planning to expand capacity to a total of 700,000 tons a year from its current capacity of 220,000 tons.

Amreli Steels Limited, country’s leading steelmaker has announced plans to increase its annual production capacity of reinforcement bars to 750,000 tons a year within the next two years.


World Steel Production. Source: WorldSteel Association

The biggest drivers of soaring steel demand in Pakistan are rapidly growing large scale manufacturing and construction sectors.

Car sales shot up  23% while motorcycle sales soared by 20% in January 2018, according to industry data.

The cement sales, a good proxy for construction sector, rose 14.3% in the first 7 months of fiscal 2017-18.

World Steel Trade. Source: WorldSteel Association

Pakistan is the third fastest growing economy among the top 25 economies in terms of purchasing power parity.  Pakistan's economic growth is continuing to accelerate amid rising rising investments led by China-Pakistan Economic Corridor related infrastructure and energy related projects.  The IMF sees Pakistan economy growing at 5.6% while the World Bank forecasts it to grow by 5.5% in current fiscal year 2017-18 ending in June 2018, a full percentage point faster than the 4.5% average GDP growth for Emerging and Developing Economies (EMDEs) that include Argentina, Brazil, China, India, Nigeria and Russia among others. However, Pakistan economic growth continues to lag growth forecast for regional economies of India and Bangladesh. The report also calls attention to the expanding current account gap as a matter of concern that must be taken seriously by the government to avoid yet another return to the International Monetary Fund (IMF).

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Pakistan Translates GDP Growth to Citizens' Well-being

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Chicken vs Daal in Pakistan

China Pakistan Economic Corridor

Comments

Riaz Haq said…
Egyptian Billionaire Eyes Further #Pakistan #RealEstate Projects - Bloomberg #Islamabad #housing


https://www.bloomberg.com/news/articles/2018-03-06/egyptian-billionaire-eyes-further-pakistan-real-estate-projects

Naquib Sawiris is developing a $2b estate in Islamabad
Pakistan faces a housing shortage as its population expands

Egyptian billionaire Naguib Sawiris’s Ora Developers will next month start building a luxurious $2 billion housing estate on the outskirts of Islamabad and is eyeing further projects as it taps demand from overseas Pakistanis.

The ‘Eighteen Islamabad’ development will feature more than 1,000 homes, a golf course and a mall on 2.25 million square meters of land. It will take six years to complete, said Tarek Hamdy, chief executive officer of the development. Sawiris holds 60 percent in a joint venture with local firms Kohistan Builders and Developers and Saif Group, owned by Pakistan’s prominent Saifullah family.

Pakistan’s real estate sector has seen a boom in recent years as militant violence has receded. Economic growth in the nation of more than 200 million people has risen to around 5 percent as China finances more than $50 billion on infrastructure projects across the country. House prices have more than doubled since 2011, according to property website Zameen.com, and housing projects are mushrooming in cities such as Karachi, Lahore, Islamabad and Peshawar,

“The market isn’t saturated,” Hamdy said in an interview at his office next to Islamabad’s Margalla hills, adding that Sawiris’s firm is eyeing potential other projects that may be announced by the end of this year.

Prices for a three bedroom home on the estate start at 30.5 million rupees ($275,395) and about $400 million will be invested in the development in the first two years, Hamdy said.

‘Highest Quality’
“You can develop a project at very reasonable margins” between 10 to 40 percent, he said. “The highest quality still makes money.”

Sawiris is not new to Pakistan. He previously set up one of Pakistan’s first mobile phone companies, Mobilink, now the nation’s largest cellular firm by subscriber numbers.

Apart from private businessmen such as Malik Riaz Hussain who is building Pakistan’s largest development outside Karachi, the military’s housing business has sped up efforts to grab market share. Hamdy sees overseas Pakistanis particularly in the U.S., U.K. and Middle East as major buyers and is considering launching another housing project by the end of 2018.

A shortage of housing units will boost construction activity in Pakistan as the urban population grows by nearly 30 million by 2027, BMI Research said in a December report. Construction has been one of the largest recipients of foreign direct investment and in the first seven months of this fiscal year $380 million was invested in the sector, according to central bank data.

Riaz Haq said…
House prices in #Pakistan have more than doubled since 2011. Developers flocking to build more #housing. #economy #realestate #CPEC (via @BIAUS)

https://www.businessinsider.com.au/pakistan-house-price-boom-2011-2018-3

Property developers are flocking to Pakistan to take advantage of a housing shortage.
Steady economic growth and a booming population have underpinned a recent surge in house prices.
Pakistan property is booming.

Australia’s residential construction boom may have reached its peak, but it looks as if Pakistan is just getting started on something similar.

As a case in point, a $US2 billion housing construction project gets underway next month on the outskirts of Islamabad, Pakistan’s ninth-largest city.

According to a report by Bloomberg, the project will be run by the development company of Egyptian billionaire Naguib Sawiris, as developers look to cash in on a Pakistani housing boom.

The end-product will see the construction of more than 1,000 new houses, with prices starting at 30.5 million rupees (around $US275,000) for a three-bedroom home.

Pakistan’s economy has been on the rise in recent years, seeing annual GDP growth climb to 5% with a corresponding boom in real estate prices.

The growth trends have been driven by a material reduction in militant violence, and the flow-on effects from $US50 billion worth of Chinese investment in large infrastructure projects.

China has been actively strengthening ties with Pakistan, which it views as a key regional ally for its One Belt, One Road initiative.

Earlier this year, China stepped in to defend Pakistan after the US said it would cut aid to the country. Pakistan also conducts trade deals with China denominated in Chinese yuan.

Bloomberg cited the property website zameen.com, which said house prices in Pakistan have more than doubled since 2011 in the country of 200 million people.

Developers are flocking to the region attracted by the high margins still on offer for major real estate projects, with most developments attracting a return of between 10-40%.

And demand for housing is still strong, with steady stream of new projects in larger cities such as Karachi and Lahore.

The country’s housing shortage is most likely part of a longer-term trend, with Pakistan’s urban population expected to grow by around 30 million people by 2027.
Riaz Haq said…
Pakistan's capacity utilisation stands 91%
07 March 2018

https://www.cemnet.com/News/story/163604/pakistan-s-capacity-utilisation-stands-91-.html

The All Pakistan Cement Manufacturers Association (APCMA) reports that the domestic cement industry's capacity utilisation in the first eight months of this fiscal year (July 2017-Feb 2018) stood at 91 per cent of the total installed capacity of the sector.

In 8MFY17-18 the country's cement industry dispatched 31Mt of cement compared with dispatches of 26.3Mt in the corresponding period of last year, an increase of almost 18 per cent. In February 2018 alone, the total cement dispatches were 3.781Mt.

A spokesman of APCMA said that the cement industry is among the highest contributors to the national exchequer over the last few years. The contribution has increased to PKR117bn (US$1bn) in FY16-17 from PKR39bn in FY12-13. In FY16-17, the impact of duties and taxes was PKR3082/t or PKR154/bag. This incidence of high taxation negatively affects domestic consumption, said APCMA.

Presently, federal excise duty (FED) on cement is PKR1250/t, or PKR62.5/bag. The government should honour its promise and gradually reduce FED to zero to encourage cement off-take as this would support housing and infrastructural development in the country and create more employment, the association argued.

An APCMA spokesman, attributing domestic sector growth to government policies and its thrust on mega infrastructure projects, said that the local production could increase substantially if the smuggling of this commodity from Iranian border is checked.

Moreover, APCMA appealed that the customs duty on import of both clinker and cement should increase to a uniform rate of 35 per cent to support the local cement industry.

"Moreover, import of cement should not be allowed until Pakistan Standards and Quality Control Authority certifies the quality of cement being imported into the country," the association added.
Riaz Haq said…
#Pakistan #automobile sales jump 23% in first 8 months of FY 2017-18 to 170,354 cars.
#manufacturing https://www.dawn.com/news/1394949


Sales of locally assembled cars, light commercial vehicles, vans and jeeps exhibited a 23 per cent year-on-year growth to 170,354 units despite an increase in their prices.

According to figures released by Pakistan Automotive Manufacturers Association (Pama), sales in February stood at 22,654 units, up 15pc as 1Q of calendar year is generally a robust period for auto sales.

The change in import procedure, demand from online ride-hailing services and availability of auto finance at lower rates contributed to strong demand in outgoing month, said Rai Omar Basharat of Topline Securities.

Pak Suzuki Motor Company Ltd (PSMCL) sales rocketed 25pc year-on-year in February as price-conscious models Mehran, up 30pc year-on-year, WagonR 27pc, and Cultus 23pc all showed strong sales growth. The 8MFY18 sales were up 30pc year-on-year to 96,062 units.

Honda’s car sales clocked in at 4,501 units, up 20pc (plus 3pc month-on-month), while 8MFY18 sales grew by 38pc to 33,669 units due to success of recently revamped City and rebound in sales of BRV up 20pc month-on-month.

Toyota lagged behind with a decrease of 8pc/5pc, YoY/MoMm due to capacity constraints, though 8MFY18 units sales were up 2pc YoY.

Tractor sales grew by 14pc in February. Al-Ghazi Tractors outperformed, exhibiting a 40pc growth. During 8MFY18 tractor sales reached 44,627 units, up 40pc.

Total truck sales surged to 5,859 units in July-Feb 2017-18 from 4,677 units in same period last fiscal. Bus sales dropped to 420 units from 765 units.

Two- and three-wheeler sales for Feb 2018 went up by 18pc year-on-year due to rising disposable income of lower middle class, while 8MFY18 sales were up 19pc year-on-year to 1.258 million units.

Riaz Haq said…
#Pakistan #LSM growth speeds up 9.44% in January 2018 to highest in nearly a year. #steel #auto #cement #manufacturing

https://www.thenews.com.pk/print/293334-lsm-growth-speeds-up-9-44pc-in-january-to-highest-in-nearly-a-year

KARACHI: Large scale manufacturing (LSM) sector posted a gigantic 9.44 percent year-on-year growth in January on increasing cement and steel consumption and rising auto sales, official data showed on Friday.

Pakistan Bureau of Statistics (PBS) data showed that large-scale industries grew 13.58 percent in January over December 2017, while LSM growth was recorded at 6.33 percent during the first seven months (July-January) of the current fiscal year of 2017/18. LSM growth stood at 3.45 percent for July-January period of FY2017.

Analysts said the uptrend indicated that actual annual number would surpass the LSM growth target of 6.3 percent set for the current fiscal year.

“Services and agriculture sectors are not showing significant growth and so we can expect that LSM will play a primary role in increasing GDP size,” Ahsan Mehanti, chief executive officer at Arif Habib Commodities said. LSM accounts for 80 percent of manufacturing sector that contributes 13.5 percent share to GDP. Government is eying six percent economic growth for FY2018 as against 5.3 percent in FY2017, which was a decade high.

Mehanti said Chinese-pledged infrastructure developments are leaving positive impact on industrial activities. “So far $15 billion have been invested in CPEC (China-Pakistan Economic Corridor) projects and that investment reflects in rise in cement and steel consumption.”

In July-January, iron and steel production rose around 34 percent, followed by automobiles (21.23 percent) and non-metallic mineral products (12 percent). “The three heads have the highest cumulative growth impact,” Adnan Sheikh, assistant vice president at Pak Kuwait Investment Company said. “Non-metallic mineral production mainly grew on robust cement numbers.”

PBS data showed that cement production soared 23.5 percent year on year in January and 12.3 percent in the July-January period as Cherat Cement and Lucky Cement added their cement production capacities.

Sheikh, however, said LSM growth was hampered by seven percent lower fertiliser production due to plant closures amid high liquefied natural gas price and low urea retail price, along with delay in sugarcane crushing. “This led to nine percent lower sugar production, though it may recover in remaining months.”

PBS said the production in July-January 2017/18 as compared to the corresponding period a year earlier have been significantly increased in food, beverages and tobacco, coke and petroleum products, pharmaceuticals, nonmetallic mineral products, automobiles, iron and steel products, electronics and paper and board while decreased in fertilisers and leather products

All the three data collection authorities registered increase in production during the first seven months of FY2018. Provincial bureau of statistics, counting production of 65 products, recorded 4.84 percent growth in July-January.

Ministry of industries, measuring output trend of 36 items, recorded 6.62 percent increase in production in the July-January period, while Oil Companies Advisory Council, logging outputs of 11 oil and petroleum products, measured 9.45 percent rise in output.

The State Bank of Pakistan said the large-scale manufacturing sector has also been performing well, as it experienced a 10 percent growth during Q1FY2018 – the highest quarterly growth since FY2009.

“The performance was encouraging as, barring fertiliser, all segments contributed positively,” the central bank said in a report. “While cement and steel industries benefitted from the ongoing infrastructure and construction activities, production of white goods was aided by the rising domestic demand.”
Riaz Haq said…
The International Steel Limited (ISL) has commenced production from its new plant, increasing the rolling capacity of the company by 1,000,000 metric tons.

https://www.brecorder.com/2018/06/28/425413/international-steel-starts-new-plant-brings-production-to-1-million-mt/

With the increase in production, after an investment of Rs5.6 billion, ISL has emerged as the largest producer of cold rolled steel products in Pakistan.

“We are pleased to inform that the company’s state of the art rolling mill has commenced production (from) 21 June, 2018. This addition has increased the rolling capacity of the company to 1,000,000 metric tons per annum,” the steel mill said in a statement to Pakistan Stock Exchange (PSX).

“With this expansion, ISL (International Steels) will be the largest producer of flat products in the country resulting in significant reduction in dependence on imported steel products as well as invaluable savings in foreign exchange,” the company added.

The company informed about its expansion plan, back in February 2017, where ISL revealed that it will be adding Cold Rolling Mill, a Pickling line and related facilities, which was arranged through its own finances and long-term bank loans.

The International Steel Limited recorded Rs3.234 billion profit in the nine months ended March 31, as compared to Rs2.016bn profit in the corresponding period last year. The company’s sales jumped 40 per cent to Rs34.817bn during the period from Rs24.781bn in the corresponding period last year.

Riaz Haq said…
From Steel Statistical Yearbook 2017

Pakistan Steel Consumption 42 Kg per capita 2016

India 72.3 Kg per capita

Bangladesh 25.7 Kg per person

China 504.9 Kg per person

Japan 528.4 Kg per person

UAE 518.5 Kg per person

USA 318.4 Kg per person

Germany 522.5 Kg per person

Sudan 9.0 Kg per person

https://www.worldsteel.org/en/dam/jcr:3e275c73-6f11-4e7f-a5d8-23d9bc5c508f/Steel+Statistical+Yearbook+2017.pdf
Riaz Haq said…
#Pakistan 2016 Per Capita #Steel Consumption: 42 Kg, #India 72.3 Kg, #Bangladesh 25.7 Kg, #China 504.9 Kg, #Japan 528.4 Kg, #UAE 918.5 Kg, #USA 318.4 Kg, #Germany 522.5 Kg, #Sudan 9.0 Kg https://www.worldsteel.org/en/dam/jcr:3e275c73-6f11-4e7f-a5d8-23d9bc5c508f/Steel+Statistical+Yearbook+2017.pdf

https://twitter.com/haqsmusings/status/1034143767626801156
Riaz Haq said…
#Pakistan Total Primary #Energy Consumption in 2016: 83.2 million tons of #oil equivalent (MTOE), up 7.6% from 2015. Source: BP Statistical Review of World Energy

https://www.bp.com/content/dam/bp/en/corporate/pdf/energy-economics/statistical-review-2017/bp-statistical-review-of-world-energy-2017-full-report.pdf …


https://twitter.com/haqsmusings/status/1034450542779486208
Riaz Haq said…
#Pakistan's Amreli #Steels’ profit surges 48pc in FY2018.“Net sales were up mainly on account of increase in retail #construction and higher PSDP (public sector development program) expenditure by the government in elections year"
https://www.thenews.com.pk/print/367678-amreli-steels-profit-surges-48pc-in-fy2018

Amreli Steels Limited posted a 48 percent growth in profit at Rs1.6 billion for the year ended June 30, translating into earnings per share (EPS) of Rs5.34, a bourse filing said on Wednesday.
The rebar roller earned Rs1.1 billion with EPS of Rs3.62 during the preceding fiscal year, a statement to the Pakistan Stock Exchange said. It declared a cash dividend of Rs2.20/share.

Amreli Steels recorded 17 percent growth in revenue at Rs15.5 billion in FY2018.

Analyst Moazzam Akhtar at Taurus Securities Limited said sales revenue grew due to rise in average selling prices and higher production.

“Earnings witnessed a jump on the back of a 12 percent rise in gross profit and significant reduction in taxation despite a staggering 89 percent increase in finance costs and 19 percent rise in distribution and admin expenses.”

The steel mill availed tax credit in relation to its new Dhabeji plant.

Brokerage First Capital Equities said growth in earnings was due to a major tax reversal, “providing a boost to the bottom line of the company”.

“Net sales were up mainly on account of increase in retail construction and higher PSDP (public sector development program) expenditure by the government in elections year,” First Capital Equities added. Akhtar said the company’s gross margin declined 78 basis points mainly on account of rise in scrap costs.

“Further, production lagged behind expectations which we think would be due to new Dhabeji rolling plant operating at utilisation levels lower than that were envisaged for May/June 2018 and SITE rolling plant operating at lower capacity of 60 percent throughout the quarter (due to power shortages),” he added.
Riaz Haq said…
Carbon Steel Welded Pipes: #Canada slaps anti-dumping duty on #Pakistan’s CSWP product. A provisional duty of 10.1% was imposed on IIL (International Steel) and 58% on other #Pakistani exporters. #Steel #exports https://tribune.com.pk/story/1843381/2-steel-pipes-canada-slaps-anti-dumping-duty-pakistans-product/

Canada has imposed anti-dumping duties on the import of circular welded steel pipe (CWSP) from four countries including Pakistan, the Philippines, Turkey and Vietnam in the range of 3% to 95%.

The Canadian Border Services Agency (CBSA) and the Canadian International Trade Tribunal (CITT) commenced a preliminary injury and dumping inquiry into CWSP imports from the above four countries.

Last month, the CBSA announced its preliminary determination on dumping margins on CWSP imports from Pakistan and International Industries Limited (IIL). A provisional duty of 10.1% was imposed on IIL and 58% on other Pakistani exporters. The provisional dumping margin will remain in effect until the final determination is announced by the CBSA, which is due in January 2019. The CITT’s final decision will be announced in February next year.
“Despite this, there is no financial exposure to IIL for any of our exports to Canada to date,” said an IIL notification on Thursday. “Although our sales to Canada continue for the time being, there may be a slowdown in sales depending on the final injury findings to be issued by the CITT in February 2019.”

It added that IIL had engaged experienced legal counsel in both the countries to aggressively contest the inquiries initiated by the CBSA and CITT. The company expressed confidence that a positive outcome would emerge.

According to Shankar Talreja of Topline Securities, IIL exports Rs1.3 billion worth of its products to Canada “which translates into 5% of its total sales of Rs25 billion and 29% of its total exports of Rs4.47 billion.”

“The sale to Canada was not a major chunk of the company’s total sales, so there wouldn’t be a significant impact,” the analyst added.

Pak-Kuwait Investment Company AVP Research Adnan Sami Sheikh said in comments to The Express Tribune that duties had also been imposed on other countries ranging from as low as 3% on one Turkish company to a high of 95% on other companies of the country.

Sheikh, however, pointed that the duties could be revised in the final decision if there were complaints from the Canadian manufacturers.

Elixir Securities’ Research Analyst Sharoon Ahmed said the variation in anti-dumping duties depended on the level of a company’s dumping margin. “Higher the dumping margin, the higher is the duty so that prices in the domestic market remain stable and indigenous players can also compete,” he said.
Riaz Haq said…
Pakistan steel industry will meet future demand

https://thefinancialdaily.com/pakistan-steel-industry-will-meet-future-demand/


Currently, Aisha Steel Mills is undergoing expansion to increase CRC production capacity to 450,000 ton. A continuous galvanized line with an annual capacity of 250,000 ton is also being added taking overall production to 700,000 ton per annum. The products will be sold in the local market and surplus will be exported.
Dr. Munir Ahmed said the consumption of steel in Pakistan is around 35 kg per capita. Domestic steel production is to reach 4.5 million ton by mid-2019. Additional steel capacity of 1.7 million ton is expected to come online by mid-2019, as major players in the domestic industry are pursuing aggressive expansion plans at a cost of around Rs15 billion to cash in on the rising domestic demand. This would augment the local steel production capacity to 4.5 million ton from the current 2.8 million ton capacity.
International Steel, for instance, increased its CRC capacity from 250,000 ton to 550,000 ton during FY15 to FY16 after converting their compact cold rolling mill to a twin stand reversing mill. Similarly, their galvanizing capacity increased from 150,000 ton to around 460,000 ton after adding a second galvanizing line. They are currently in the process of upgrading their CRC capacity from 550,000 ton to 1.0 million ton at an estimated cost of Rs5.6 billon.
Amreli Steels has diversified its product base, producing billets as well as rebar. Their capacity for rebar production has grown from 180,000 ton to first 300,000 ton and eventually 425,000 ton and for billets from 100,000 ton to 600,000 ton. Capacity to expand the CRC to 750,000 ton. Aisha Steels is also expanding its operations vertically. It plans to produce galvanizing products as well as CRC. An investment of Rs3.9 billion would take its capacity from 220,000 ton to 450,000 ton for CRC while introducing new capacity of 250,000 ton for galvanized coils.
Mughal Steel is investing around Rs1.0 billion to increase its total capacity from Pakistan’s key relationships are with China, US, India, Russia, Afghanistan, Iran and the European Union.

---------------

According to SBP’s State of the Economy report for FY18, steel manufacturing grew by 22 percent during FY18, and 21 percent in the preceding year; some of the highest growth numbers in Large Scale Manufacturing sectors. Much like twin industry cement, steel makers experienced a notable boost as the economy expanded.
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For every six ton of cement, one ton of steel is used for construction. That can be a good starting point. By 2022, Pakistani cement industry will have about 70 million ton of capacity. By that estimate, steel capacity should be around 12 million ton, but it is only going to be 4.5 million ton. However, how much of the new cement capacity will be absorbed is a big question mark. Demand coming from CPEC projects already underway will remain but the new Imran led government has cut down a lot on development expenditure. Meanwhile, interest rates are not conducive for new investments. Real estate development, especially in the commercial sector may become lethargic. It is anticipated that automotive demand will also get affected going forward which in turn would affect steel demand. This reduction in demand could be met with the Naya Pakistan Housing plan that envisages to construction five million new houses. BR Research estimates, that should lead to an annual 20 to 22 million ton of additional cement.
Riaz Haq said…
A review of 9MFY19 performance of Pakistan’s cement industry

https://www.cemnet.com/News/story/166258/a-review-of-9mfy19-performance-of-pakistan-s-cement-industry.html

IGI Securities has reviewed the performance of Pakistan's cement industry for the first nine months of FY18-19 (July 2018-March 2019). Provisional numbers show that cement dispatches for March 2019 declined by 12 per cent YoY to 4.11Mt. On a cumulative basis, this brings 9MFY18-19 total dispatches to 34.19Mt as against 34.76Mt, recorded in the same period last year, marking a fall of two per cent YoY.

While local sales from southern Pakistan have grown by over 15 per cent during the nine-month period as a result of excess capacity and deeper penetration, those from the north of the country have dropped by 12 per cent YoY largely, due to curtailed government spending on development projects and reduced private construction activities amid weak macroeconomic indicators.

While export sales have been on the rising trend ever since 4QFY18, amid rising capacities in the south, clinker exports account for a major share. Contrary to cement exports which achieve better prices of US$50-55/t in the international market, clinker is sold at relatively-lower and less-profitable prices of US$32-35/t.

Cement exports from the north, particularly in the last two months, have been on the decline, mainly due to the deteriorating trade terms with India amid rising political tensions between the two countries.

Cement prices
As of 28 March 2019, average cement prices in the northern region stood at PKR596/bag (US$4.23), down by one per cent MoM, according to weekly data published by the Pakistan Bureau of Statistics (PBS). Average cement sale prices in the south have marginally edged up by 0.6 per cent to PKR613/bag.

Outlook
Pakistan’s cement sector in FY18-19 is ending with a decline with little improvement expected in FY2019-20. Following the seven per cent YoY contraction of local dispatches in 9MFY18-19 and with the holy month of Ramadan around the corner during which construction activities are substantially reduced, analysts expect FY18-19 to end with a below-par performance when compared with the previous year.
Riaz Haq said…
Pakistan sources 65-70% of its total scrap requirement primarily from the UK and Europe. The rest comes from the Middle East, North America, South America, Australia etc.


https://www.steel-360.com/personality/pak-steel-industry-likely-to-revive-in-a-years-time


Scrap is also produced domestically, but which fulfils only around 20% of our total requirement. Thus, a significant volume of the material has to be sourced from overseas.

Q. Scrap demand in your country is at around 50% of its optimal capacity… So, when do you think there can be an upturn in the demand scenario?
A. Munif-ur-Rehman: The demand scenario has improved much at present due to upcoming infrastructure projects. Ferrous scrap demand is actually fuelled by the demand for steel billets and rebars. Demand of steel is gradually increasing due to infrastructure development projects like coal-based power plants, dams, motorways, flyovers, railways, bridges and housing schemes etc. The China Pakistan Economic Corridor (CPEC) has had a positive influence on the steel industry since its inception. Moreover, the Government of Pakistan has launched a big housing project which will add to the demand for steel. The future of Pakistan’s steel industry thus looks better.
-----------------

All our steel comes from the EAF  (Electric Arc Furnace) and IF (Induction Furnace) routes. Pakistan has around 350 steel smelters and among them only 6-7 are EAFs, while the rest are all IF-based. EAF is a technologically advanced process compared to IF but it requires more maintenance which adds to the cost. EAFs are usually feasible for larger-scale melting arrangements that make it more commercially viable. For instance, one of the leading mills owns a 45-tonne furnace.

There are multiple challenges this industry faces.


Usually, challenges are in the form of expensive power tariffs which raise the cost of production significantly. Besides that, there is the issue of competing with low- grade billets and ingots in the local market at unregulated prices which makes it difficult to sell quality products in the market at the right prices. There should be long-term sustainable policies by the government which should not be affected by any external influences.


As for the opportunities, we see these in the initiation of big infrastructure projects, including CPEC. There is also news that China is going to set up a steel mill in the northern area of Pakistan through a joint venture.
Besides, the government has announced zero-rated custom duty in order to facilitate imports of scrap in the Budget for 2019-20. This may also lead to an increase in the imports of melting scrap. Moreover, a new standardised taxation structure is in place which will create a level playing field for the steel manufacturers, irrespective of their size.

Pakistan is ranked 28th with an estimated volume of 5 million tonnes (MnT) of crude steel production per year. The official figure of 2019 is yet to come in. However, the estimated volume is around 6 MnT at present. Overall, finished steel demand is around 8 MnT per annum. Prices of finished steel depend on the prices of raw materials. For instance, rebars have different strengths but when prices of rebars go up, finished steel prices also rise in tandem.


Despite the drawbacks, there is expansion and new plants (IFs) are coming up. Players feel there will be a demand surge for finished steel. If all goes
well, the potential domestic scrap demand of 400,000 tonnes per month may increase by 20-25% or even more – because newer plants are coming up and they are going for economies of scale. These players are setting up bigger plants so that the cost per tonne goes down. The present cost per tonne differs across IFs and EAFs and across regions too.

Hafiz-ur Rahman Khatib: There are thus opportunities for our company… we are hopeful that in one or one-and-a-half years, the Pakistan economy will revive and the steel industry, which is the backbone of an economy, will too look up, InshaAllah
Riaz Haq said…
According to SBP (2017), steel industry is leading the large-scale manufacturing (LSM) sector with growth rate of 16.58 percent from Jul-Mar 2016-17. On the one hand, the spectacular growth of industry is being highly appreciated while the malicious output quality is being considered as a major point of concern, on the other. Presently, the steel industry of Pakistan is using the induction furnace technology to produce the steel and this technology has not only become highly obsolete but is also considered as environmentally devastating.

https://epaper.brecorder.com/2018/05/08/6-page/715714-news.html

Further, the quality of steel produced through induction furnace route does not meet the quality standard. Due to this reason China, the largest steel producer, has completely banned the use of Induction furnace for steel production and has shifted its crude steel production either toward blast furnace (BF) technology or electric-arc furnace (EAF). Despite the fact that blast furnace is the dominating production route, since 2007, global steel production, through the electric-arc furnace(EAF) process, has seen a sharp upward trend. According to some observers, the efficiency, feedstock flexibility and environmental advantages of EAFs make investing in them more attractive than other options, especially concerning existing and upcoming Carbon Emission Regulations and growing steel scrap reservoirs.

Furthermore, Electric-arc furnaces are pollution free and have outstanding metallurgical control. This greatly reduces the demand of energy required to make steel when compared to primary steelmaking from blast furnace. That is why it is becoming the first choice for steel making in emerging economies. For example, since 2005, India has become the second largest EAF-based steel producer in the world, after China, and its EAF production exceeds that of the United States. The steel production through EAF route is projected to be 31% by 2025. The quality of the steel produced through EAF route is far better than that of produced by induction furnace.

Presently, 95% of Pakistani steel firms are using the induction furnace processes for production except the Pakistan Steel, in public, and Agha Steel Industries Ltd in private sectors. The steel producing firms in Pakistan are highly reluctant to adopt the Electric Arc Furnace (EAF) technologies as they perceive “cost with no return”.

This reluctance to shift from induction furnace toward blast or electric arc furnaces technologies may pose several challenges to firms in local steel industry. In past, the same has happened to our Cement Industry where a number of factories were closed down due to their inability to adopt new technology, hampering industry growth at least by 2%, according to crude estimates. It resulted in closure of number of those cement factories that did not take proactive measures to adopt new technologies. The case of country’s Textile industry; the reduction of Pakistan’s share in global textile to 1.8% from 2.2% due to the inability to adopt latest technology, is another example of it.
Riaz Haq said…
How Agha Steel plans to tech-disrupt the Pakistani steel industry
The steel manufacturing company is about to conduct Pakistan’s third IPO of the year and could be the largest Steel IPO in 5 years. What does Hussain Agha, the young CEO have planned up his sleeve?

https://profit.pakistantoday.com.pk/2020/09/27/how-agha-steel-plans-to-tech-disrupt-the-pakistani-steel-industry/


Global steel production for 2019 stood at 1,867 million tons after rising 3.4% compared to the previous year. Production, however, contracted in all regions except Asia and the Middle East. China alone increased its production to 996 million tones in 2019, and increased its share of the global crude steel industry from 50.9% to 53.3%.

In comparison, the total steel demand of Pakistan is tiny, at around 7.1 million tons annually, of which imports meet 45% of local demand. Pakistan remains an under-penetrated market: the per capita steel consumption is the second-lowest in the world at 37 kilograms per capita against the global average of 240 kg per capita.

Domestically, the steel industry in Pakistan is divided into two sub-industries: flat products (coils and sheets) and long products (rebars and billets). The long steel sector in Pakistan accounts for 75% of total steel produced in Pakistan, and has more than 600 small players that have an estimated capacity of 5 million tons.


Long products are further divided into graded and ungraded. Graded accounts for 25% of long products, and are mainly produced in mini mills, which use induction furnaces, or an older form of steel production.

Ungraded is the most common form of steel production, which is basically ship breaking. In Pakistan the ship breaking industry is situated at Gadani, Balochistan, which features around 100 shipyards owned by various ship breakers. Ships are dismantled into steel scrap plates which are then sent to re-rolling mills.

There are some major problems with ship breaking. The most obvious one is that it is inefficient: the rebars made through this process are often of low quality. As customers move towards better quality and graded products, ship breaking is in decline.

But Pakistan is also one of a handful of countries in the world – along with India and Bangladesh – that even allows ship breaking to begin with. Ship breaking has massive environmental risks, allowing toxic elements to seep into the ship graveyard. It is also extremely dangerous for labourers, with fumes and explosions. It is why a labourer can expect to earn up to Rs70,000 a month – about four times the monthly minimum wage – in scrapping a ship at Gadani, though quite literally at the risk of their own life. Gadani itself is rampant with labour rights violations, just like in other developing countries.


Riaz Haq said…
With a big part of the fragmented industry operating in the informal sector, it is almost impossible to estimate the exact domestic demand and supply ratio. But the industry estimates that the per capita steel consumption, according to the Pakistan Credit Rating Agency, has increased to over 43kgs (from less than 25kgs a decade back). Yet the per capita consumption remains one of the lowest in the world against the world average of over 240kgs.


https://www.dawn.com/news/1589282/bad-policy-good-intention


The steel demand has picked up sharply since June following the resumption of business activities after the decline in the Covid-19 infections in Pakistan. The unaudited accounts of some of the major companies listed on the Pakistan Stock Exchange (PSX) for the first quarter of the ongoing financial year to September confirm that the industry is on the path of quicker recovery from the severe pressures of the International Monetary Fund mandated economic stabilisation policies exacerbated by the negative impact of the coronavirus pandemic in the last quarter of the previous fiscal year.

The accounts show that the companies have recorded better top-line growth this year so far when compared with their performance during the corresponding period last year. The bottom lines of the steel manufacturers, who had suffered significant losses last year, are also turning green from red. The rebound in the fortunes of the steel firms is ascribed mainly to the pent-up demand unleashed by the Covid-19 economic stimulus package implemented by the State Bank of Pakistan (SBP), including the reduction of 6.25 percentage points in the policy interest rate to seven per cent, to fight off the effects.

“The impact of the construction and housing package announced by the government is yet to come on the steel industry,” Meher Kashif, the managing director of Model Steel, one of the largest steel companies with a manufacturing capacity of 600,000 ton, asserted during an interview with this correspondent. “The demand in the construction sector, which feeds into 35-40 allied manufacturing industries and services, remains subdued so far. The reasons are as clear as day: the public sector development spending has been slashed substantially; no new industrial project is being undertaken, and no large commercial project is coming up,” he elaborated.

Speaking about Prime Minister Imran Khan’s generous housing initiative, Kashif explained that the measures announced favoured the large corporate companies, which do not see much demand for housing in the market at this moment. The smaller contractors, who work with a capital of up to Rs100 million, do not find the package attractive enough because of requirements of documentation, he added.

“The developers and investors have used the construction package to purchase land but nobody has until now announced any major scheme. That’s why you see the land prices falling again. The government needs to find a solution to support the undocumented small builders who operate in the informal economy to construct one or two houses a year and inspire confidence and bridge the trust gap or the success of its housing initiative.”

The raft of lucrative policy, fiscal, and monetary measures announced to push-start construction and housing include no-question-asked-on-source-of-income-amnesty-scheme on the investments made in the construction industry before the end of 2020, and tax cuts and exemptions for real-estate developers and builders. These incentives were topped up later with cash support of Rs300,000 each on the first 100,000 housing units in the price range of under Rs2.5m (this does not include the cost of land) and subsidised mortgage finance for 10 years on the construction of 5-marla and 10-marla housing units.

Riaz Haq said…
#Steel bars get pricier amid #construction boom in #Pakistan. Price hikes came at a time when #economic activities worth Rs1 trillion & Rs100 billion had been generated in Punjab & Khyber Pakhtunkhwa, respectively, in housing and construction projects. https://www.dawn.com/news/1593040

Manufacturers of quality steel bars increased their prices by up to Rs3,000 per tonne in November on the back of rising raw material costs in world markets and growing strength of the rupee against the dollar.

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On Friday, Prime Minister Imran Khan was informed in a meeting of the National Coordination Committee on Housing Construction and Development that 6,000 apartments would be constructed in Karachi under a project called Pakistan Quarters. In the first phase, work would start on 700 residential units at a cost of Rs4 billion over the next three months.

Another meeting on the Karachi Transformation Plan (KTP) presided over by the premier was informed that more than 100 projects worth Rs1.1 trillion have been planned under the programme.

Mughal Iron and Steel Industries Chief Operating Officer Shakeel Ahmed said the company pushed up the price of good quality steel bars by Rs3,000 per tonne in November to Rs114,500-115,000 per tonne.

Ruling out the possibility of increasing the price of long-steel product to cash in on the rising demand in the northern areas owing to construction activities, he said raw material prices have risen to $370 per tonne from $330 per tonne in the last one month. It happened due to various reasons like port congestion and the fear of further lockdowns in world markets.

The management of Mughal Iron and Steel Industries had informed analysts of brokerage houses that the Naya Pakistan Housing Programme (NPHP) can potentially create 6-7m tonnes demand for long steel assuming the government builds 50 per cent of the promised houses.

The company views future demand to come from the China-Pakistan Economic Corridor (CPEC) and the five hydro dam projects. It has already won a contract for three dams. It estimates steel demand of 350,000 tonnes from Bhasha Dam and 250,000 tonnes from Mohmand Dam in the first phase.

Razaque Steels Managing Director Irshad Mowjee, who also serves as general secretary of the National Steel Advisory Council (NSAC), said his company has increased the price by Rs3,000 on two kinds of quality steel bars, which now cost Rs111,500 and Rs116,500 per tonne.

Shredded scrap prices in world markets have risen due to lockdowns in Europe and the United States. The supply of scrap has become scarce, resulting in a hike in international prices. Yards do not have materials and the incoming supply is limited, resulting in the prices going up by $40 per tonne within the last three weeks, he added.

Fearing a further increase in steel bar prices if scrap rates do not come down, he suggested that the regulatory duty on raw materials should be abolished. The duty is not justified on raw materials used in a basic industry as industrialisation is the government’s top priority.

If it is not removed, it will affect the viability of CPEC projects. Cost overruns will happen as steel is a major component, he said.

Mr Mowjee urged the government to remove the additional customs duty of 2pc as competing raw materials are exempted from it. At present, the incidence of tax is around Rs23,000 per tonne, which needs to be reduced, he added.

Shredded scrap is used for manufacturing good quality bars for infrastructure projects. Increasing prices will affect the viability of CPEC projects, he said.

Gadani supplies ship plates that are used as raw material for lower-quality steel bars. Their prices have not increased, thus making bars made from steel billets uncompetitive. This may cause a drop in the production of good quality bars for infrastructure projects, he said.
Riaz Haq said…
Cement, steel prices continue to soar
Uptrend hampering recovery of construction activities in country

https://tribune.com.pk/story/2277008/cement-steel-prices-continue-to-soar

Owing to an expected jump in demand for steel and cement around the globe following the invention of Covid-19 vaccines, the uptrend in local prices for the two commodities has accelerated, which is hampering the recovery of construction activities in Pakistan.

Amreli Steels has announced a hike in the price of rebars by Rs5,000 per ton in addition to an increase of Rs5,000 per ton announced earlier during the month, said JS Global analyst Arsalan Ahmed in comments to The Express Tribune.

“It appears that the decision has been taken on the back of uptick in global scrap prices by almost $60 (Rs9,600) per ton,” he said. “After the recent increase, the price of rebars of the company stands at Rs128,000 per ton.”

Pakistan Association of Large Steel Producers (PALSP) Secretary General Syed Wajid Bukhari said that the price of scrap had soared from $300 per ton in early November 2020 to $450 per ton now due to shortage in the international market.

“The price has risen exponentially and several local mills have stopped buying raw material for now,” he said.

Dawood Hercules Corporation Research Lead Karim Punjani said owing to the rollout of Covid-19 vaccines, the international prices of the two commodities had soared.

“Companies expect demand for their products to skyrocket, hence prices of inputs including coal and steel scrap have hiked across the world,” he said.

Prior to the introduction of vaccines, Covid-19 was denting the global economy, he said. However, following the invention of vaccines, Covid-19 is being perceived as a disease, not a pandemic, which can be contained and losses borne on account of the virus can be recovered.

“This has led to a significant rise in demand,” he said. “Coal was priced at around $80 per ton before the global lockdown was imposed in March and fell to $65 when the lockdown was lifted.”

Given the current jump in demand, the price of coal has jumped to $90 per ton, said Punjani.

He added that local demand for steel and cement also swelled following Prime Minister Imran Khan’s announcement of a relief package for the construction sector.

He pointed out that instead of absorbing the hike in prices of inputs, companies were passing on the impact to consumers.

“A seasonal impact is also being witnessed with regard to coal prices,” he said. “In winters, hydropower plants observe maintenance shutdowns and countries generate electricity through coal and LNG plants.”

However, some builders have a different opinion about the hike in prices of cement and steel as they claim that the producers are taking benefit of the surge in demand for the two commodities.

“It is a conspiracy against Prime Minister’s Naya Pakistan Housing Scheme as well as the national economy,” said Association of Builders and Developers of Pakistan (ABAD) Chairman Fayyaz Ilyas in a statement issued in the backdrop of a sudden rise in steel and cement prices.

He urged the federal government to take immediate action against the industries which were trying to sabotage the steps taken by the government to revive the national economy.

Even though most of the raw material is local, cement and steel manufacturers have raised prices of their products to Rs625 for a 50kg bag of cement and Rs126,500 per ton of steel, which is not justified.

He was of the view that the cartel of cement and steel manufacturers seemed determined to crush the construction industry.

“Cement and steel are the main inputs for the construction sector but manufacturers of the two products are busy minting money without any justification and authorities are helpless to take any steps against these cartels,” he added.
Riaz Haq said…
#Pakistan’s #cement sales in the 2nd quarter of fiscal year 2020-21 touched an all-time high of 15.1 million tons, up 11% quarter-on-quarter as well as year-on-year. In the first half of FY21, cement sales rose 16% year-on-year to record 28.6 million tons

https://tribune.com.pk/story/2279722/cement-steel-prices-to-remain-high


Pakistan’s cement sales in the second quarter of fiscal year 2020-21 touched an all-time high of 15.1 million tons, up 11% quarter-on-quarter as well as year-on-year, according to a report of Topline Securities.

In the first half of FY21, cement sales rose 16% year-on-year to 28.6 million tons, it revealed.

“Cement prices will register a further hike as capacity utilisation is increasing robustly,” Topline Securities’ Deputy Head of Research Shankar Talreja told The Express Tribune. “The power to influence prices is with manufacturers at present.”

Industry utilisation based on total sales came in at 91%, adjusted for closed capacities, in the second quarter (Oct-Dec) of FY21. Based on just local sales, the utilisation stood at around 77% with 86% in the northern region and 48% in the southern region.

The strong growth in cement sales could be attributed to economic recovery in the face of low interest rates, announcement of a construction package, allocation of banking sector liquidity to the construction and housing sector and beginning of construction of dams, he said. In the last three months, housing loans increased by Rs43 billion, he added.

“During the outgoing quarter, coal prices surged to an average of $60 per ton compared to $55 per ton about six months ago,” he said. “As a result, fuel cost per ton for major cement companies is expected to increase by 10% quarter-on-quarter.”

To pass on the impact to consumers, the cement producers hiked prices in December 2020 by around Rs20 per bag in the north to Rs570. JS Global analyst Arsalan Ahmed told The Express Tribune that steel prices were on the rising trend.

Pakistan Large-Scale Steel Producers (PALSP) Secretary General Syed Wajid Bukhari said due to shortage of scrap globally, its price had risen above $500 per ton and as a result, rebar rates were increasing in Pakistan. “Local companies, however, are working at margins of less than 5%,” he said.

He added that Pakistan was almost totally dependent on imported raw material for producing steel and requested the government to take urgent measures to contain the impact of price hike on the mega infrastructure projects as well as other ongoing construction projects.

The industry suggested to the government to remove sales tax for some time and reduce the cost of electricity to offset the impact of soaring raw material prices, which was a global phenomenon, he said.

However, the government did not take any measures to address the situation, he lamented.

“We believe that the steel sector has been ignored as it is not receiving much-needed attention from the government,” he said.

Recently, the demand for steel picked up but margins remained very low and most of the large units were working at 50-60% of their capacity, he said.

“In recent months, steel prices have increased by 55% in India,” he said. “In the US, prices are likely to touch $1,000 per ton, which is twice the rate being charged a few months ago.”
Riaz Haq said…
Federal Minister for Planning and Development Asad Umar said on Sunday afternoon said that Century Steel, a Chinese firm with an investment of US $240 million, would set up a steel mill in Rashakai Special Economic Zone (SEZ) which would produce about 1.5 million tons of steel.

https://gwadarpro.pk/1378965463858860033/chinese-company-to-produce-15-million-tons-of-steel-amp-jobs-asad-umar

Addressing the reception ceremony of the first consignment, carrying equipment and machinery for Century Steel at Karachi Port to set up a steel mill in the Rashakai SEZ, Umar said this occasion was another manifestation of exceptional relation between Pakistan and China.

He said the Chinese firm would also employ over 600 Pakistanis during the construction phase while in the second phase over 1000 people would be provided jobs.

According to an official statement, Umar said projects under China Pakistan Economic Corridor (CPEC) were progressing at a fast pace during the tenure of the incumbent government.

He informed that China Road and Bridge Corporation, (CRBC), a Chinese firm had entered into an agreement with Pakistan under CPEC to promote foreign investments for development and marketing in Rashakai SEZ.

He said the work for the provision of necessities including electricity and others at Rashakai SEZ was underway at a fast pace.

Asad Umar said CPEC was now entering into the most important second phase. The projects were now not limited to infrastructure only.

He said the bilateral relation between Pakistan and China was not new and whenever Pakistan needed a friend China was there.

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