Steel Policy copy - National Steel Advisory Council (NSAC)

NATIONALSTEELPOLICYM A R C H , 2 0 1 9

HEAD OFFICEM3, Mezzanine FloorBeaumont Plaza10 Beaumont RoadCivil Lines, Karachi

Tel: (92 21) 3568 0045

Email: [email protected]

“Implementation of an integrated National Steel Policy will help Pakistan double its annual steel consumption to 18 million tons in the next 5 years paving the way for self-sufficiency in steel.

“An integrated National Steel Policy shall lay the foundations for sustainable industrialization for decades to come.

NATIONALSTEEL POLICYM A R C H , 2 0 1 9

N A T I O N A L S T E E L P O L I C Y 0605

‘The outcomes, interpretations and conclusions expressed do not necessarily reflect the views of the entire domestic steel industry. Although every effort has been made to cross-check and verify the authenticity of the data, the National Steel Advisory Council does not guarantee the topicality, accuracy, completeness or quality of any data, information or methodology provided herein and therefore shall not be held liable for the accuracy of same. All data and statistics used are correct as of November 2018, and may be subject to change.

Furthermore, NSAC will not be liable in respect of any business losses, including without limitation loss of or damage to profits, income, revenue, use, production, anticipated savings, business, contracts, commercial opportunities or goodwill. Any conclusions, interpretations and analysis based on data from World Steel Association, International Iron and Steel Institute, Morgan Stanley, International Trade Centre and Pakistan Bureau of Statistics does not necessarily reflect the opinion of these authorities.

For any feedback or queries regarding this report, please contact [email protected]

A C K N O W L E D G E M E N T S

Team Leader:Syed Hasan Adnan

Researchers:Rahat AzharZahir Navrozally

D I S C L A I M E R

About the Council

Executive Summary

Overview of the World Steel Industry

Overview of the Domestic Steel Industry

T A B L E O F C O N T E N T S

09

11

13

21

3 0

3 1

3 3

3 4

3 4

3 6

3 9

4 0

4 3

44


Industry Analysis

Pakistan Steel Mills (PSM)

Shipbreaking Industry

Al - Tuwairqi

Long Products

Flat Products

Engineering Steels

Tubes & Pipes

Key Risks For The Domestic Steel Industry

National Steel Policy

Conclusion

Annexure I

Annexure Il

Annexure Ill

Annexure IV

Annexure V

59

61

62

63

67

68


4 6

4 7

4 8

4 9

4 9

5 0

5 1

5 2

5 2

Creation of Steel Demand

Raw Material Availability

Land

Logistics

Water

Power

Environmental Management

Technological Efficiency

Human Resource Development

Steel Research & Technology

Steel Development Committee (SDC)

Steel Standard Enforcement

Income Tax Incentives

5 3

5 3

5 4

5 5

5 5

5 7

Tariff and Duties

Sales Tax Special Procedures, 2007

The Council serves as a not-for-profit, Steel Policy advocacy platform, registered under the Societies Registration Act, 1860. The body was constituted to ensure sustainable growth and development of the steel industry in Pakistan by advising the government on key policy matters.

The Council is led by professionals and steel industry experts in order to have a collective voice for representation at various forums, including Government Authorities and Functionaries to seek an enabling and conducive environment for the growth of the steel industry. The NSAC is a non-partisan, steel industry advocacy group which does not advocate for any specific steel product sector and prides itself on equal representation of all members. The Council aims to highlight the valid concerns and problems faced by the local steel industry and seek their resolution with the concerned authorities at appropriate forums.

The NSAC desires to work closely with the relevant government departments, ministries, regulators and institutions, as well as other stakeholders including professional bodies, to develop consensus on major issues which impact the conduct of steel business in and from Pakistan. The Council will be responsible for formulating policy as a roadmap for the domestic steel sector while promoting Responsible Steel.


A B O U T T H E C O U N C I L F O U N D I N G M E M B E R S O F T H E C O U N C I L

The National Steel Advisory Council (NSAC) is a consortium ofkey players in the Pakistani steel industry.

Pakistan is the world’s fifth most populous nation with an estimated demographic footprint of over 210 million people. Our nation’s geostrategic location provides convenient access on the west to the resource rich Middle East, Africa, and Central Asian States. Whereas, adjoining to the east, lie two major centers of economic power – China and India. The country is also blessed with an abundance of natural resources, such as high value minerals and ores, fairly good quality coal and massive theoretical offshore reserves of natural gas, for which exploration by international energy companies are underway. Pakistan’s human resource base has contributed immensely towards the infrastructure development and socio-economic uplift needs of many countries in the region and this base is expanding - both in terms of numbers and skills acquisition. It is therefore no surprise that the extensive US$ 62 billion undertaking, termed The China Pakistan Economic Corridor (CPEC), was envisioned to accelerate growth via investments in energy, road & rail connectivity, industry and agriculture in order to leverage Pakistan’s tremendous potential as a gateway state and hub for economic activity. Such broad based investments are expected to lift the economic prospects of the country and bring about a structural transformation in the economy. Pakistan is in effect ready to ‘takeoff’ and it is now more critical than ever that policies and reforms be designed to take full advantage of the opportunities that lie ahead.

To this end, a nationwide consortium of large scale steel manufacturers, representing various segments of the steel industry, have formulated a roadmap for the sustainable growth and development of the indigenous steel industry in the shape of the first ever integrated National Steel Policy (NSP). An integrated steel policy is the need of the hour for the country as:

The steel industry serves as a key enabler in the economy by providing the basic raw materials for public infrastructure development projects and key industries such as, housing and real estate development, energy, automotive, defense and various micro, small & medium enterprises (MSME) engaged in downstream engineering and fabrication business.

Steel consumption is currently one of the fastest growing areas in the economy, with consumption growing at a compounded annual growth rate (CAGR) of 19%, i.e. approximately a doubling of steel consumption every 5 years. Industry sources estimate that an additional 9 million tons of steel will be required in the next 3-5 years to support investments and expenditure on

01.

03.

housing and public infrastructure, energy, engineering and automotive & consumer goods across the country. According to The World Bank, Pakistan is short of almost 10 million housing units, which will require substantial steel input if we are to bridge this gap. Through successful policy intervention, if The Government of Pakistan (GoP) is able to attract investment in the industry in the coming years, the country will benefit from estimated savings from import substitution of US$ 2.2 billion/annum, investment of US$ 2.2 billion and an addition of 100,000+ direct & indirect jobs.

The strategic nature of the steel industry is well established and self-sufficiency in steel is a longstanding objective of major industrial and military powers. Steel is a key ingredient for the defense industry and self-sufficiency would provide a strategic advantage as the global steel industry consolidates and eliminates excess capacity, making availability of finished steel products more challenging.

In light of the above, the objective of the NSP is to help develop a modern steel industry that is globally competitive in terms of cost, quality and global benchmarks of efficiency, sustainability and productivity. Key areas in need of policy direction from the GoP to achieve the objectives are creation of sustainable demand, availability of raw material and land, energy and water requirements, logistics, criteria for technological efficiency, environmental management and quality control standards. It is hoped that the Policy will go a long way in establishing Pakistan as a major player of in steel production, processing and trading in the region. As part of a philosophy of continuous improvement the Steel Policy will also be under continuous review keeping in view the dynamic nature of the steel industry.


E X E C U T I V E S U M M A R Y

02.

OVERVIEW OFTHE WORLDSTEEL INDUSTRY

World crude steel production in 2017 was 1,689 million MT. The category-wise breakup of the same is depicted in Figure 1 below:

Billets, Re-enforcing bars, structural sections, wire rods, bars, rails etc.

Hot Rolled Coil (HRC), Cold Rolled Coil (CRC), Hot Dipped Galvanized Coil (HDGC), Color and other Coated Coils, and Plates.

Seamless pipes, longitudinally welded pipes of up to 406.4 mm (≤ 16”) diameter, and spiral-welded pipes of a diameter of more than 406.4 mm (> 16”).

LONG PRODUCTS FLAT PRODUCTS TUBES & PIPES01

WORLD STEEL PRODUCTION AND PRODUCT MIXF I G U R E 1

02 03

Category Product Range Production(MT in millions)

Share (%)

Flat Products

Long Products

Tubes & Pipes

Engineering steels /SBQ

Total Crude Steel

Sheet &

Plate

Billet

Rebar

Wire Rod

Bar

Structural

Rail

734

137

47

1,681

45%

44%

8%

3%

763

44%

45%

8%

3%

100%

Source: World Steel Association, 2017

Flat Products

Long Products

Tubes & Pipes

Special Steel (Flat & Round)


The iron and steel industry is the backbone of modern society and often termed the ‘mother of all industries’. The industry has significant forward and backward linkages in terms of material flow, employment and income generation. Mining and scrap recycling industries provide the basic raw materials for steelmaking, whereas finished steel products are used in building and infrastructure development, energy, automotive, consumer goods, engineering applications and as raw materials for various downstream fabrication industries. From an engineering perspective, steel offers a range of unique properties with respect to its durability, strength, cost-effectiveness and safety.

Steel is an indispensable product in that the production and per capita consumption of steel is a major contributing factor towards growth of a country’s gross domestic product (GDP) and as an indicator of its industrial and economic wellbeing. Empirical evidence suggests that for developing economies there exists a strong positive correlation between GDP growth per capita and steel consumption per capita as steel is a key input used to propagate industrialization and socio-economic development. However the importance of steel, and commodities in general, diminishes as economies mature and transition towards production of higher value added goods and services.

Finished steel products can be classified into the following three broad categories:

World steel production has almost doubled from 847 million MT in the year 2000, to 1,689 million MT in 2017, as per Figure 2a below. China features as the largest steel producing nation today, with crude steel production volume of 831 million MT in 2017, equivalent to roughly 50% of the total global steel production. In Figure 2b, post year 2000, the powerful impact of China on world steel production, has been labelled as ‘The China Effect’. China, is also currently the largest net exporter of steel (60 million tons) and plays a major role in dictating international steel prices. It is worthwhile to note that China can produce Pakistan’s annual demand of finished steel products in a mere 4 days, on top of which, the Chinese steel industry have been provided preferential access to the Pakistani market by way of the China Pakistan Free Trade Agreement (CPFTA). Other major players include Japan (104 million MT) and India (101 million MT).

As depicted in Figure 3, world steel installed capacity surpassed two billion MT in 2012-13. Steel production has traditionally been lower than capacity due to the nature of the production process. Since steel production is measured in tons, the quantity produced varies with the product mix (sizes, thicknesses, etc.).

Post 2008-09, as global overcapacity escalated due to slowing demand and further capacity additions, primarily in China and the Far East, steel has increasingly become a politically sensitive topic, resulting in dumping, export subsidies, price wars and generally softer prices of finished steel products and their raw materials. A wave of anti-dumping investigations were initiated worldwide against Asian manufacturers in 2014-15 as affected countries stepped up efforts to protect their domestic steel industries. This wave of protectionism culminated in the imposition of Section 232 tariffs of 25% on steel imports by the United States of America in mid-2018, in an effort to revive domestic manufacturing and reduce unemployment.

CRUDE STEEL PRODUCTION BY COUNTRY (MILLION TON)F I G U R E 2 a

Country 1980 1990 2000 2010 2017

China

Japan

India

USA

USSR/Russia

South Korea

Germany

Turkey

Brazil

Ukraine

Pakistan

World Total

37

111

10

124

147

6

7

3

15

-

n/a

717

66

110

15

90

67

23

38

9

21

42

0.78

770

127

106

27

102

59

43

46

14

28

31

1

847

639

110

69

80

67

59

44

29

33

33

0.8

1,443

Source: World Steel Association

831

104

101

81

71

71

43

38

34

21

5

1,689

1250

1000

750

500

250

01920 1930 1940 1950 1960 1970 1980

Oil Shocks

Privatisations

Consolidations

Fall ofBerlin Wall

1990 2000

THE EMERGING AGE

THE GOLDEN AGE

NEW GOLDEN AGE

THE EFFICIENCY AGE

THE CHINA AGE?

THECHINAAGE?

pre 1945

1945 - 1973

1974 - 19942.8% pa

6.2% pa

0.2% pa

1996 + >4.6% paREBUILIDNGOF EUROPE

RISE OFJAPANM

T


GLOBAL STEEL INDUSTRY GROWTH AND ECONOMIC ENVIRONMENTF I G U R E 2 b

Source: International Iron & Steel institute

Figure 4 below outlines the two major methods of producing crude steel, i.e. the blast furnace process and electrical melting process. The blast furnace process of steelmaking was the preferred route up until the 1980’s. It is highly capital and resource intensive, with estimated breakeven output levels of 3 million MT per annum. The electrical melting process has become increasingly popular for small-medium sized steelmaking units as the capital and resource requirements are significantly below that of the blast furnace process. Breakeven output levels may vary from 0.5 – 2 million MT per annum depending upon the size of the investment. It is estimated that today approximately 70% of crude steel is manufactured using the blast furnace process, with the balance 30% being manufactured via the electrical melting process.

Figure 5 below categorizes a broad range of steel products, as per international norms, as raw materials, intermediate products and finished products. A detailed listing with HS Codes is referenced in Annexure II.


MIL

LIO

N T

ON

NE

S

2500

2000

1500

1000

500

0

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

e

Capacity Production

WORLD STEEL CAPACITY AND PRODUCTIONF I G U R E 3

Source: Morgan Stanley Research Estimates, CRU Company Data

ROUTES TO MANUFACTURING CRUDE STEELF I G U R E 4

Production route Type of Furnace(s)used

Basic raw materials

Blast Furnace Process

Electrical Melting Process

Share (%)

Blast Furnace and Basic Oxygen Furnace (BOF)

Electric Arc Furnace (EAF) / Induction Furnace

Iron Ore(s), Coke, Flux, Oxygen

Steel Scrap, DRI/HBI, Oxygen, Ferroalloys & Electrodes

70%

30%

CATEGORIZATION OF STEEL PRODUCTSF I G U R E 5

Material Category Definition Products

Raw Materials

Intermediate Products

Finished Products

Raw materials are materials or substances used in the primary production or manufacturing of crude steel.

A product which is not used for final consumption, but is used in the manufacture of another product.

Finished goods are goods that have completed the manufacturing process and are ready for use.

Iron ore, Direct Reduced Iron (DRI), Steel Scrap, Hot Briquetted Iron (HBI), Ferro-Alloys,Coking Coal

Slab, Billet, Bloom, Ingots

Bar & Rod, Angles, Shapes & Structural Sections, Plate, Hot Rolled Coil, Cold Rolled Coil, Hot Dipped Galvanized Coil, Colour & Other Coated Coil, Pipes, Tubes & FittingsRails


OVERVIEW OFTHE DOMESTICSTEEL INDUSTRY


Pakistan has made noticeable progress in almost all important sectors of the economy - agriculture, commerce, industry and services. Although, primarily an agro-based economy, the contribution of engineering, automotive, building and construction sectors in the GDP of the country is significant. Engineered goods, medical and surgical equipment consist of 20% of total manufactured goods export and rely heavily on steel inputs for providing a constant supply of raw materials. Similarly, the transportation and automobile sectors contribute 12% in GDP and are also steel intensive. Rapid urbanization, provision of basic infrastructure for rural areas, CPEC projects and industrialization are recognized as the primary stimulants for steel demand.

The current market size of the Pakistan steel industry is estimated at 9 million MT per annum. The category and product wise breakup of which is as shown in Figure 6 below:

Total domestic installed production capacity is currently estimated at 8.5 – 9 million MT per annum, including 1.1 million MT of PSM capacity, which has been offline since June 2015. Capacity utilization ratio of the industry as a whole is typically 75-80%. Total steel imports during FY 2017-18 were 8 million MT, of which 5.3 million MT were in raw material form and 2.7 million MT in finished product form. Despite the fact that local manufacturing capacity of tubes, pipes and long products including rebar, bar, wire rod and sections is sufficient to meet domestic demand, Figure 6B below shows that over the last 4 years import of tubes, pipes and long products has been fairly static, as predominantly only those special grades of tubes, pipes and long products that were not manufactured locally were imported.

However imports of scrap increased as more long products were produced domestically from scrap. Furthermore, import of HR coils increased as the domestic production of value added flat products like cold rolled, pre-painted galvanized iron and hot-dipped galvanized flat products increased, which are made from hot-rolled coils. As a result the country made significant foreign exchange savings as the cheaper scrap and HRC was imported instead of the more expensive rebar and cold rolled and galvanized coils.

The import of special steels however seems to have been continuously increasing even though there is sufficient manufacturing capacity to meet domestic demand. All Domestic steel sectors continued to be hurt , some more than others, by cheap under invoiced imports and a collection of SRO that allow specific industries subsidized import duties even if the products they require are imported locally.

PAKISTAN STEEL MARKET SIZEF I G U R E 6 a

Category Product Range Market Size(MT in 000’s)

Share (%)

Flat Products

Long Products

Tubes & Pipes

Other miscellaneous

Total Consumption

HRC

CRC

HDGC

Billets

Rebar

Wire Rod

Bar

Sections/Beams

Rail

5,000

780

320

9,000

32%

9%

56%

3%

56%

32%

9%

3%

100%

Source: ITC, Industry Sources

Flat Products

Tubes & Pipes

Long Products

Other Miscellaneous

1,500

700

700

Local Capacity(MT in 000’s)

550

1,750

5,000

1,750

-


Finished product imports have been rising at a CAGR of 29 between FY 2013-14 and FY 2015-16. This trend has only recently been arrested in FY 2017-18 as domestic capacity additions came online and some protection was provided to local manufacturers. However, these capacities and measures are inadequate to fulfill future needs. As per international standards, every 5 MT of cement used in infrastructure projects requires 1 MT of steel. With local cement dispatches estimated at 41 million MT (APCMA, Topline Research) for FY 2017-18, current domestic steel production capacity is lagging behind. Furthermore, the cement sector plans to increase capacity to 70 million tons by 2021, which will require domestic steel capacity in construction grade products to rise by approximately 4.5 million MT to keep up with envisaged demand.

Pakistan is still amongst the lowest per capita consumers of steel at 46 kg/capita, which is well below the world average of approximately 228 kg/capita (World Steel Association, 2017), indicating immense potential for growth in this industry. Given Pakistan’s large population base, a mere 10 kg per capita increase in steel consumption would require additional supply of 2 million MT of steel. This shows the sheer magnitude of steel that will be required in the years to come as Pakistan embarks upon the journey of ensuring self-sufficiency in steel.

Currently the steel industry’s average net profit margins (extracted from public listed company accounts) are approximately 7%. It is imperative to support capital formation in the industry as this is the means through which the industry can re-invest in technology, scale and innovate to make itself globally competitive. Around ten steel producers are listed on the Pakistan Stock Exchange (PSX), most of them having entered into the capital market between 2011 and 2017. This represents the highest number of new listings during the six-year period in any one sector. It should be noted that two of the entrants are from the flat products (ISL & ASL) segments, whereas the other eight are all manufacturers of long products and tube & pipe. Domestic steel companies have gained major supply contracts in energy and infrastructure, including, Orange Line, Karachi-Lahore Motorway, Neelum-Jhelum hydropower project, SSGC & SNGPL gas distribution projects and LNG transmission projects among others.

STEEL IMPORTS (IN MT)F I G U R E 6 B

2013-14 2014-15 2015-16 2016-17 2017-18

Raw materials/Intermediategoods

Finishedproducts

Total Finished Product Imports

Grand Total

Scrap / Semi Finished Products

Flat Products

Long Products

Alloy / Special Steels

Tube & Pipe

Source: Pakistan Bureau of Statistics (PBS)

5,288,315

2,221,166

141,428

181,326

197,835

2,741,755

8,030,070

4,268,283

2,219,525

164,831

136,129

198,135

2,718,620

6,986,903

3,111,264

1,469,871

129,927

107,777

196,723

1,904,298

5,015,562

2,032,281

1,255,582

83,306

95,066

140,474

1,574,428

3,606,709

4,054,236

2,109,304

131,532

180,892

207,991

2,629,719

6,683,955

PER CAPITA STEEL CONSUMPTIONF I G U R E 7

Source: World Steel Association, 2017

Bangladesh, 27

Pakistan, 46India, 75

Iran, 273

USA, 338

China, 545

World Average Steel Consumption:228 Kg/Capita (2017)


PAKISTAN STEEL INDUSTRY MANUFACTURING CAPACITY AND MARKET SIZEF I G U R E 8

Category Product Line Company CompanyCapacity(MT)

LongProducts

FlatProducts

Tubes &Pipes

Alloy & EngineeringSteels

BilletsRebar, Wire-Rod, Angles, Shapes, StructuralSections, Beams, Girders

Hot Rolled Coil

Cold Rolled Coil,

Galvanized Coil,

Color Coated Coils

LongitudinallyWelded Tubes & Pipes, Galvanizing

Seamless Pipes

Bars, plates, forgings etc.

Amreli Steels Ltd.

Mughal Steel Ltd.

Agha Steel

Abbas Steel Group

Others

Pakistan Steel Mills (1)

Pakistan Steel Mills (1)

Aisha Steel Mill Ltd.

International Steels Ltd.

Crescent Steel & Allied Products Ltd.

Others

International Industries Ltd

Others

Huffaz Seamless Pipe Ltd.

Peoples Steel Mills (2)

Peoples Steel Mill

700,000

700,000

400,000

300,000

2,350,000

550,000

550,000

750,000

1,000,000

250,000

200,000

750,000

400,000

100,000

50,000

75,000

9,125,000

TotalDomesticCapacity(MT)

5,000,000

550,000

1,750,000

450,000 (3)

1,150,000

150,000

75,000

9,125,000

TotalDemand(MT)

5,000,000

2,700,000

1,400,000

PROJECT BASED

780,000

140,000

75,000

8,895,000

Spiral WeldedPipes, PolymerCoated Pipes

(1) Pakistan Steel Mills (PSM) has been out of commission since June 2015(2) Peoples Steel Mills’ seamless pipe plant will be operational in March 2019(3) 450,000 MT capacity of Spiral Welded Pipes & Polymer Coated Pipes includes Crescent Steel & Allied Products Ltd. and Data Steel

Pakistan imported roughly $4.9 billion worth of metal products in the first 11 months of FY 2017-18 (Pakistan Business Council, Imports Break-up 2017-18). During this period, the contribution of metal products in the total import bill of Pakistan was roughly 9%. Year-on-year growth in the metals category over the corresponding period in the previous year was approximately 22%, which was the third highest behind vehicles and petroleum products.

Steel consumption in Pakistan has been rising at a compounded annual growth rate (CAGR) of 19% during the last 5 years (World Steel Association, 2018) - representing roughly a doubling of steel demand every five years. At this rate and at current prices, Pakistan’s import bill for metals by 2022-23 would amount to roughly $10 billion. Although this is an unsurprising statistic for the industry, as growing nations require significant steel input for investment in public infrastructure and downstream raw material requirements, such an outcome would clearly be a significant challenge for a country that is already prone to systemic balance of payment crises from time to time. Furthermore, empirical evidence strongly suggests that the price elasticity of steel demand is very low (Mo and Wang, 1970) as most industrial and retail consumers cannot easily replace steel with other inputs.

There is substantial agreement among development economists that a successful trade policy features a healthy mix of import substitution and export promotion strategies, and that successful trade policy should be an integral part of a general industrial policy framework - this is also one of the key takeaways from the Chinese industrial development experience (Heiden, 2013). As it stands today, Pakistan is largely a labor-intensive and capital-scarce economy, implying the need to focus on labor-intensive light industry; as a short term approach this would seem as a viable way forward, however, in a broader industrial and trade policy context there is a need to formulate forward looking industry specific strategies and policies with a wider timeframe of 10-20 years in mind. Successful industrialization in China, India, and other East Asian economies have all featured multiple cascading 5 and/or 10 year plans, with careful focus on implementation, evaluation, control and recalibration. On the other hand, countries without long term policy objectives are bound to remain in a perpetual state of under-development; the Prebisch-Singer hypothesis (Prebisch 1950, Singer 1950) is a well-articulated manifestation of this outcome, whereby developing countries continue producing (and exporting) low-value added commoditized goods whose prices are highly sensitive to business cycle fluctuations, resulting in weak and often deteriorating terms of trade vis-à-vis their trading partners. Conversely, the import profile of such countries usually consists of high value added goods and services, leaving significant room for exploitation by

WHY SELF-SUFFICIENCY IN STEEL IS ESSENTIAL FOR PAKISTAN

rahat.azhar

Sticky Note

10,095,000


No local integrated steel-makingNot enough local steel scrap generationHindrance in availability of energyLimited exploration and mining efforts for iron ore

Competition from foreign players, especially ChinaCompetition from the unorganized sector

I N D U S T R Y A N A LY S I S

SUPPLIER'S POWER

INDUSTRY RIVALRY

Many operators supplying products, fragmented industrySwitching costs are lowBuyers want best quality at minimum price. Have the option to import.

BUYER'S POWER

Limited & expensive substitutability - Aluminum, plasticLow buyer inclination to substitute

THREAT OF SUBSTITUTESHigh capital costsVery few players enjoy economies of scaleLow barriers - product differentiationTime consuming land, infrastructure & environmental approvalsStrength of established relationships with customers and suppliers

THREAT OF NEW ENTRANTS

industrialized countries (Heiden, 2013). There are numerous examples of such underlying patterns in the economic structure of developing nations, the same must be recognized, and counter strategies be developed to mitigate such results.

The development of basic industries such as iron and steel offers an obvious way out for Pakistan with respect to the, focus on technology-intensive steel products such as cold-rolled steel strip/sheet, coated or clad steel sheets, electrical/grain-oriented steel and various alloy steels shall pave the way for indigenization of downstream manufacturing of motor vehicles, household appliances and light and heavy machinery.

Due to the large size of the domestic economy, Pakistan is not expected to face the limitations of a limited market, in fact, in terms of market size, Pakistan ranks fairly high at number 28 amongst 137 countries assessed as per the World Economic Forum (WEF) Global Competitiveness report 2017-18. This will allow the build-up of scale by local steel manufacturers and ultimately help in reducing high fixed costs. The issue of domestic availability of raw materials for steelmaking should also not act as a roadblock for development of the iron and steel industry; Germany, Japan, Taiwan, Korea, and more recently, China, Vietnam, and Turkey have developed steel industries, regardless of the availability of developed local mining of iron ore and coal.


The Pakistani steel industry was once dominated by the state-owned Pakistan Steel Mills Corporation Limited (PSM), which has a nameplate production capacity of 1.1 million MT per annum of flat and long products and is spread over 19,000 acres (including 8,000 acres for employee housing colonies. The plant was formally inaugurated in 1985. The technology at PSM is based on imported high grade iron ore and coking coal as the primary raw materials. Support infrastructure in the form of berths and conveyor belts for unloading and transporting iron ore and coal present. Other minor raw materials such as limestone, dolomite (from own mines), silica sand, refractory clays and calcium fluoride have historically been sourced locally. At the current level of capacity, PSM would require a 5 times increase in order to meet current domestic demand of just long products.

Currently the plant has been lying dormant since June 2015 due to massive accumulated losses and liabilities. The accumulated liabilities comprise of loans from the NBP, unpaid SSGC bills, employee related liabilities (gratuity, PF, leave encashment), loans from the government of Pakistan used for payment of salaries and outstanding supplier payments. The previous government had already tried to revive PSM through a Rs. 18.5 billion bailout package since a failed selloff in 2006. However, political meddling, gross mismanagement, lack of investment in machinery and

P A K I S T A N S T E E L M I L L S ( P S M ) inability to compete with cheaper Chinese imports, despite considerable duty protection in the form of Regulatory Duties (RD) imposed on PSM’s finished products, left the mill in its current state. As there have not been sufficient BMR and major repairs done to upgrade the steel mill over the years the current technology is outdated and it is highly unlikely that the mill in its present condition can be run efficiently in order to be able to compete with imports. Furthermore, the hot and cold rolling mills can only produce 15 MT coils against the international norm of 25 MT and outdated electronics makes the revival of production of flat products highly improbable.

It should be noted however that the plant has a built-in potential for expansion up to 3 million MT per annum.

While the blast furnace can be reinsulated and brought into operation with some investment, PSM can only be viable if significant investment is made in state of the art manufacturing facilities to convert semi-finished goods into finished goods, whether they be in the long or flat segments. The demand for semi-finished goods in Pakistan such as billet or slab is negligible and not worth exploring. It must be highlighted here that the infrastructure that PSM has with the jetty, raw material handling systems, and water reservoirs are valuable and can be put to good use as their replacement costs are significant.

Apart from the technical front, PSM’s viability also rests on many other factors. While political consensus is a must on whether the mill should be privatized, the government must also be willing to finance the liabilities over a period of time as these liabilities have surpassed the replacement cost of the asset. Finally, the labor unions will have to be rationalized and technical expertise be built up if the state owned enterprise is to be run in a modern and sustainable manner. A brief roadmap for the revival of PSM is provided in Annexure V.

Al-Tuwairqi Steel was set up to produce DRI from natural gas, to be supplied by the government at subsidized rates. However, after hot commissioning, the plant was forced to shut down as the government was unable to supply gas at subsidized rate due to the shortage of natural gas in the country. As this DRI plant is unlikely to work economically using LNG at current market based prices, it is likely that this investment will lie dormant.

A L - T U W A I R Q I S T E E L

Long steel products comprise of bars, structural sections and wire products. In Pakistan currently, long products are manufactured by melting and refining steel scrap from ship breaking, automotive and other ferrous sources. It is then cast to form billets, which are subsequently rolled on stands to form rebars, sections and wire rods. Rebars are the largest segment of the steel industry and are used across the country in housing and infrastructure projects, high rises, power projects, ports, bridges, dams etc.

The steel melting sector includes producers of steel ingots and billets, which feeds down-stream industries such as steel re-rolling mills, foundries, steel fabricators and steel shaping units. The sector has grown steadily to its present status; 224 steel melting units having more than 300 furnaces. Some of these units have modern facilities consisting of continuous casting plants while the majority are still using obsolete technology and are unable to meet local or international standards. Domestic

L O N G P R O D U C T S


Gadani shipbreaking yard is the world’s third largest shipbreaking yard, consisting of 132 shipbreaking plots. In the 1980s it was the largest shipbreaking yard in the world and currently has the capacity to produce 1 to 1.5 million tons of steel a year. For the last few years, the shipbreaking industry has supplied roughly 700000 tons of raw materials for the production of long products in the country. The quality of these products is not up to standard for large infrastructure products and high rise buildings but is suitable for small houses and low rise buildings. Moreover, the shipbreaking activities at Gadani are performed under dangerous working conditions, with workers suffering from chronic health issues, exposure to toxins, falling steel plates and gas explosions. Hazardous wastes recovered from the ships are not always handled and stored properly. Recently the EPA has become stringent with regard to shipbreaking activities in light of the accidents that took place at the shipbreaking yards.

S H I P B R E A K I N G I N D U S T R Y

At present duties and taxes favor the industry as the incidence of taxes is approximately Rs 13500 per ton whereas it’s approximately Rs 15500 per ton for competing raw materials. The government should encourage steel produced from the shipbreaking industry to cater for small constructions but limit the use for large high rise and infrastructure projects. Also, duties and taxes should be equitable so that the price differential between the bars made from shipbreaking and other traditional sources is minimal, in order to curb the dangerous use of substandard materials in construction of large projects. There is a need to ensure that proper health and safety measures are taken. Supporting shipbreaking in Pakistan will increase domestic steel capacity and reduce reliance on imports. It will also safeguard and generate employment for thousands.

A major problem that limits major expansion and documentation in the sector is the inadequacy of regulatory bodies to enforce compliance to standards. Some players in the industry use obsolete technology and manufacture sub-standard products that are not in compliance with PSQCA standards. This is not only a national infrastructural risk but also undercuts the documented sector in price and market share since most customers lack awareness. In fact steel plays a critical role in the infrastructural safety of the country, as the geographical location of Pakistan make it particularly susceptible to the risk of earthquake disasters.

The PSQCA needs to be provided with adequate Governance, Technical resources, which are available locally, and a fully equipped metallurgical institute, enabling them to monitor and thereby ensure compliance. Members of the NSAC would be happy to spearhead such an initiative.

The government has provided a net protection to the local industry consisting of regulatory duties and customs duties on both finished goods as well as raw materials. However, all imports in the recent past have been through FTA concessions, bypassing the statutory customs duty on finished goods, and leaving negligible net protection to the local industry. While demand has been robust in the recent past, current average industry net profit margins hover around 6-7%. The local industry is also expanding capacities and planned entry of new players is expected to intensify competition. Industry projections estimate that an additional 4.5 million tons of construction grade steel will be required in the next 3-5 years to support the development expenditure on public infrastructure and housing across the nation. Moreover, with increasing rates of population growth and urbanization, the production of high quality steel will be required to support high rise construction and mega housing communities.

capacity is approximately 5 million MT, with a stronger presence in the Central Punjab region around Lahore. Most of the steel melting units have induction furnaces with a melting capacity of 5 MT or below and about 30 units have induction furnaces of capacity 10 MT or above, whereas there are only 10 units which employ Electric Arc Furnaces (EAF) of capacity 5 MT or above. The Steel Re-Rolling sector is engaged in the production of steel bars, rods, structural sections/beams, etc. to cater the demand of construction and other industries. Nation-wide installed capacity is estimated at over 5 million MT. Over 500 units have been installed to date, only 70% of which are currently in operation.

It is estimated that the long steel sector is currently contributing USD 1.2 Billion import substitution, 55,000 direct jobs, over PKR 60 Billion to the national exchequer, and has an investment base of PKR 200 billion. This sector has an annual production capacity of 5 million tons and the industry structure is highly fragmented.

The demand for steel has been fueled by a wave of expenditure on public infrastructure projects, CPEC projects and construction of mega housing schemes. Large scale manufacturers with in-house melting facilities, include Amreli Steels Limited, Mughal Steel Limited, Agha Steel and Abbas Steel Group. Other than these, there are scores of small melting and rerolling units scattered all over Pakistan. Given the robust demand outlook most of the top-tier players have either successfully concluded or are undergoing expansion to enhance both melting and rolling capacity.


Flat steel products comprise of Hot Rolled Coils (HRC), Cold Rolled Coils (CRC), Hot Dipped Galvanized Coils (HDGC) & Pre-Painted Galvanized Iron Coils (PPGI). HRC is the primary feedstock for manufacturing CRC, HDGC and PPGI. HRC can be manufactured via the reduced iron route or the electrical melting route.

With the shutdown of Pakistan Steel Mills (PSM), there is currently no active producer of HRC in Pakistan and local industry is entirely dependent on imports. It should however be noted that PSM does not produce low carbon re-rollable grade HRC that is required to manufacture CRC, HDGC and PPGI. The private sector

F L A T P R O D U C T S

cold-rolling and galvanizing sector is relatively young and consists of two companies, International Steels Ltd. (ISL) and Aisha Steel Mills Ltd. (ASL), both of which were set up with FDI and in technical collaboration with Japan. The two companies commenced commercial operations in 2011-12 with combined production capacity of 470,000 MT per annum. ISL enhanced its production capacity to 500,000 MT in 2015-16, however strong demand has since prompted both ISL and ASL to expand capacities in 2018-19 to 1 million MT and 750,000 MT respectively. With these expansions in place Pakistan stands self-reliant in finished flat steel products (CRC, HDGC and PPGI). Going forward, one expects that commercial imports of these value added materials that can be domestically manufactured will be minimized as a result of non-tariff barriers to trade, as well as other actions taken by the government to protect the local industry from imports.

To date ISL and ASL alone have contributed saving of roughly $280 million through import substitution; with the current enhanced capacities, these savings in foreign exchange are projected to swell to $165 million per annum. In addition, the localization of flat steel manufacturing has resulted in valuable transfer of technology and technical expertise.

As a result of their success, further backward integration into manufacturing of HRC is imminent. Although the investment here is significant, the savings in foreign exchange will be even higher as scrap and other raw material will need to be imported in place of HRC.

A flat duty structure on all its finished products, CRC, HDGC & PPGI instead of a cascading model.Under-invoicing of imports in order to avoid paying higher duties is prevalentMis-declaration of imports (i.e. HR coils as CR, CR coils as galvanized, galvanized coils as color coated coils or secondary products as primary) in order to reduce the incidence of duties and taxesSome manufacturers also work as traders and use tax incentives meant for manufacturers to get illegal income tax and sales tax benefits on their commercial sales. Low ITP valuation of secondary flat products allowing for dumping of inferior products from the international market

01.

02.02.03.

04.

05.

The flat products sector faces significant hurdles including:

The consumption of flat products relative to long products reflects the degree of industrialization in an economy. As countries build up requisite public infrastructure and move towards indigenizing production of higher value added items such as automobiles, consumer appliances, machinery etc., the consumption of flat steel products outpaces that of long products. Flat products are used in a vast number of applications including cold rolling and galvanizing, as raw materials in automotive and white goods manufacturing, pipe and tube manufacturing, infrastructure and construction, general engineering and numerous downstream fabrication applications. A detailed chart of flat product applications is referenced inAnnexure IV.

Initially it was expected that the protection for this sector would be 10%. However subsequently, due to concessions provided to steel products under the China Pakistan FTA (CPFTA) and increase in concessionary import duty on HRC for cold-rolling, this protection effectively fell to 5% and later to 0%. At this point, fixed cost absorption was the only option left for this sector in order to remain competitive. Currently the cold rolling and galvanizing industry has 13% tariff protection, consisting of regulatory duties and customs duties on both finished goods as well as raw materials. However, all imports in the recent past have been through FTA concessions, bypassing the statutory customs duty on finished goods, and leaving negligible net protection to the local industry.


The automotive industry is the primary driver of engineering steel demand. In Pakistan, sufficient capacity is available to produce special steels that are used to manufacture engine and transmission components for the automotive industry, yet due to competing import of finished components by the automotive industry, a great deal of capacity remains unutilized.

In Pakistan, it is only farm tractors that have a deletion level of about 95%, as their engine and transmission components are being produced in the country. In the motorcycle industry, amongst the 40 odd local manufacturers of motorcycles, it is only Atlas Honda which produces the engines in Pakistan, and is therefore a consumer of locally produced engineering steels. All other motorcycle manufacturers import finished parts and components. To ensure The Government should encourage local producers of automobiles to localize engine and transmission components so as to increase production of engineering steels in the country.

The industry faces several hurdles limiting its expansion, the major ones including:

E N G I N E E R I N G S T E E L S

Substantial quantity of tractor parts is imported for the aftermarket. A great deal of under invoicing and duty evasion exists in this segment of the market.Certain categories of engineering steels have been allowed preferential rate of import duties in the FTA with China.The aftermarket of leaf springs for the trucking industry. This market is flooded by substandard local material which is non-compliant to any international standards. Quality standards should be developed and implemented by the relevant government authorities to ensure compliance to standards of this critical component.

01.

02.02.

03.

The steel tube & pipe sector can be sub-divided into 3 major segments:

This is by far the largest segment of the tube and pipe sector catering to customers in the commercial & industrial market. The primary raw material for the segment is HRC, CRC and HDGC. Finished products include black pipes, galvanized iron pipes, hollow structural sections, API line pipes, cold rolled steel tubing and profiles, scaffolding pipe and stainless steel pipes & tubes. These products are used in a wide range of applications including, construction, automotive, agriculture, water, oil & gas distribution, fencing, fabrication and scaffolding. International Industries Ltd. (IIL) is the only listed and largest manufacturer in this segment with manufacturing capacity of 750,000 MT supplying 70% of its output domestically, with the balance 30% being exported. Up till 2011-12 100% of the raw material of this segment was imported, however with the commissioning of ISL and ASL in the flat products sector, 40-50% of the raw material requirements in this segment have been localized.

This segment has a stronger presence in the North, compared to the South of the country, with most small-medium sized manufacturers located either within or in close proximity to Lahore. Their facilities consist of local or second-hand imported equipment. The segment is largely undocumented and therefore prone to unethical business practices. Furthermore, the lack of quality standards has allowed sub-standard products to infiltrate the market. The segment is however self-sufficient and fulfills more than 95% of domestic demand with enough spare capacity to cater to export markets. Ample and consistent supply has also spawned a vast nationwide distribution network of dealers and sub-dealers

T U B E S & P I P E S

1. Longitudinally welded pipes & tube of ≤ 16” diameter


which relies on credit. The sector therefore also fulfills critical financing requirements of small-medium sized businesses which are normally not available in the unorganized sector.

This segment caters primarily to the requirements of the oil & gas drilling and exploration sectors. Local manufacturers operating in the segment include, Huffaz Seamless Pipe Industries Ltd. (HSPI) with a capacity of 100,000 MT/annum, and Peoples Steel Mills Ltd. (PSMLTD) whose 50,000 MT/annum plant is expected to be commissioned by Q3 2018-19. The segment is currently not self-sufficient as significant quantities are being imported to meet domestic requirements.

2. Seamless pipes

This segment is largely project based and does not cater to the needs of commercial market and is dependent on tenders relating to oil and gas transmission projects. The segment is comprised of Crescent Steel & Allied Products Ltd. (CSAP) and Data Steel with a combined capacity of 450,000 MT per annum.

3. Spiral-welded pipes of a diameter of > 16” diameter

Implementation of further tax for unregistered businesses adversely affects the industry as the majority of distributors and wholesalers are unregistered. Given the sector already operates on thin margins (2% to 3%), this makes it difficult to prevail in the market. There is also a different advance income tax on sales to:

This method of taxation is obscure, since the above categories are not clearly defined.

Demand from the oil, gas and construction is expected to generate significant demand in tube & pipe requirements. Spiral welded pipes and longitudinally welded API line pipes shall cater to the bulk of the demand emanating from gas transmission and distribution projects to be tendered by SSGC and SNGPL.

Distributors, dealers and wholesalers

Retailers01 02


Changes in duty structure that will reduce support to local manufacturers

Adverse movement in HRC Cold Rolled Coil (CRC) spread in international market

High and/or rising cost of utilities (electricity, water and gas) and disruption in supply

Slowdown in economic activity

Concessionary SRO’s applicable at the time of imports and for specific projects by the government

Increasing trend in imports of semi-finished auto components resulting in an adverse impact on capacity utilization of industry

Non-implementation of cascading principle on imports of finished and semi-finished components, hurting steel manufacturer as well as auto vendors.

Mis-declaration and under-invoicing of steel products at import stageInflux of substandard imports secondary products at low ITP valuations

K E Y R I S K S F O R T H E D O M E S T I CS T E E L I N D U S T R Y

N A T I O N A L S T E E L P O L I C Y


Untapped potential with strong policy support becomes the ideal platform for growth. The critical importance of the steel industry in stimulating and laying the foundation for sustainable economic growth has necessitated the formulation of a National Steel Policy. The policy seeks to accomplish its goal of ‘Make in Pakistan’ by providing policy guidance to incentivize domestic manufacturing to leverage its existing competen-cies and invest in scale.

MISSION

To achieve self-sufficiency in steel production by providing a policy framework which guides and incentivizes state-owned and private sector steel manufacturers to build scale

01

Develop policy guidelines to incentivize investment in state of the art technology that will lead to cost-effective and globally competitive steel production

02

Leverage existing strengths and opportunities to attract foreign investment in the local steel industry

03

Develop a roadmap to encourage use of locally produced Responsible Steel.

04

To foster industrial growth and downstream manufacturing by making locally made steel products readily available to the entire country

VISION


To drive steel demand, the following steps should be encouraged:

C R E A T I O N O F S T E E L D E M A N D

Usage of steel should be encouraged in all buildings and structures. Efforts at government level to promote lifecycle costing in project evaluation, rather than looking at just the upfront cost in isolation should be encouraged.

No concessions on import duties or taxes be ensured under CPEC projects for any materials manufactured locally

Steel intensive designs and structures should be promoted in housing schemes.

Replacement benefits of existing bridges, pavements, etc. should be evaluated.

Efforts to be made to increase steel usage in making railway stations, foot over bridges, etc.

A policy on preference for domestically manufactured steel products in government procurements should also be implemented to lend necessary support to the domestic industry.

Deletion of engine and transmission components of the automotive industry.

Control on imports of semi-finished / finished auto parts and components, with an aim to achieve minimum 90% localization ratio of automotive parts within 3 years

Compliance to standards in the aftermarket

Creation of steel demand is one of the foremost tasks tobe undertaken.

The following goals and objectives are set to reflect the consensus reached amongst the participants of the consultative process who collectively recognized the need to restructure and modernize the steel industry in order to meet the increasing demand for quality steel in Pakistan:

GOALS

Revive domestic Iron & Steel Industry, with emphasis on Blast Furnaces, DRI, EAF/Induction Furnaces

Build a globally competitive steel industry with production capacity of 45 million MT by 2030-31

Increase steel consumption to 160 Kg/capita by 2030-31 (population growth 2.40% per annum)

Meet 100% of local demand for commercial quality steel by 2025

Implement quality standards for domestic steel products by 2020

Meet 100% of local demand of high-grade automotive steel, electrical steel, special steels and other alloy steels for strategic applications by 2030-31

Be a net-exporter of value-added steel products by 2030-31

Develop new technologies for the utilization of indigenous raw materials such as iron ore and coal

Develop a sound human resource base equipped with appropriate technical expertise to drive innovation

Support the public and private sector in developing efficient and quality infra-structure i.e., land, roads, rails, electric power, water, information & telecom-munication network

Establish independent materials testing & certification institutes, as well as research, design & development centers based on public-private partnership

To encourage material and energy efficient processes across steel making and downstream industries

To encourage industry to be a world leader in energy efficient steel production by 2025-30, in a safe and sustainable manner


The electrical melting process is the most prevalent route to steelmaking in Pakistan as the blast furnace process is significantly more capital intensive, requires substantial support infrastructure and relies on developed iron ore and coal deposits or bulk imports. However, the blast furnace process can be more cost efficient and flexible depending on different factors. The steel industry uses different raw materials depending upon the technology installed. For the blast furnace process, iron ore and coking coal are critical raw material inputs. Their timely and assured availability in adequate quantity and quality, on long-term basis, is a prerequisite for the rapid and orderly growth of the sector. Iron ore deposits have been discovered in the country but the majority of these may not be of the quality required for steel production. The government needs to ensure that a thorough working is performed to evaluate and estimate the iron ore formulation and its quality. However, exploration, beneficiation and mining can be an extremely costly venture running into hundreds of millions of dollars and there are only a few private groups that have the capacity for such an endeavor, particularly when many mineral deposits are in remote areas with poor law and order conditions and connectivity. In India, for example, a state owned company is responsible for the exploration, mining and supply of iron ore to the steel industry. Pakistan must continue exploration of iron ore as this is the only way that the integrated steelmakers using the blast furnace process can have a competitive advantage over imports.

Coking coal is also an important raw material for steelmaking. Up till now, we have not been able to find high-grade coal required for coking purposes. However, exploratory efforts must continue. It should also be noted that mineral and coal production is gaining importance in the steel value chain due to increase in freight rates. As such any investment in the mining of these products could result in Pakistan having a new avenue for exports. Apart from iron ore and coking coal, other steelmaking raw materials, such as limestone, dolomite, manganese ore and fluorite are also found in Pakistan. Since the majority of steelmaking in Pakistan is based on the electrical melting process, steel scrap and DRI are the primary raw materials used for crude steel production. Ensuring local availability of raw material helps increase the quantum of import substitution, self-reliance and global competitiveness. There is not enough steel scrap generation in Pakistan to feed the steel industry and therefore approximately 90% of the scrap requirements are imported. A detailed feasibility of nationwide scrap segregation, collection, processing and recycling centers is required

R A W M A T E R I A L A V A I L A B I L I T Y

One of the major stumbling blocks for investment in the steel industry is the appropriate availability of land and utilities. Investors that are willing to invest billions of rupees in the sector can’t seem to find a suitable tract of land where utilities such as electricity, water and natural gas are available. Steel plants generally need large tracts of land ranging from 10 acres to 200 acres depending upon the size of the plant and technology employed. Due to the sharp increase in land prices over the past couple decades, the cost of land in the overall project cost has become very high and brings down the ROE. When moving to areas where the land is cheap and available in large tracts, the availability of electricity, water and gas becomes an obstacle.

Moreover, steel is a very heavy product with costly transportation. Currently, majority of the raw materials for steelmaking are imported. As such it is recommended that a Special Economic Zone (SEZ) exclusively for steel industry investments is set up near the port with same incentives applicable to already established steel industry. Creation of related common infrastructure on partnership basis will be promoted to optimize land use. To promote economic activities in the zone, the Government should provide a viable and properly maintained infrastructure consisting of roads & bridges, information & communication network, water and gas supply lines, and dedicated uninterrupted power supply. The Government must encourage cooperative investment supported by special incentives to set-up captive

L A N D

to assess the potential for enhancing domestic availability of scrap. If so, incentives for investment in modern steel shredding plants must be offered. Scrap processing is a highly labour intensive process and the success of such an endeavor will have far ranging effects on employment generation and environmental sustainability.

Pakistan and Afghanistan partnership in the mining sector can be jump started with joint development of mineral deposits that are close to the Pakistan border. Recent conclusions from the US Geological Services indicate existence of huge quantities of exploitable minerals in this region. These include iron ore, copper and gold. Being a landlocked country, Afghanistan’s best partner for mineral development is Pakistan, with convenient access to ports, infrastructure and low cost technical and construction expertise. The Hajigak iron ore deposits are reputed to be among the largest high grade iron ore deposits in the world. These reserves of 1,800 million tones can be converted into approximately 1 billion tons of finished steel valued at $400 billion.

Steel is a very difficult product to transport. The current transportation system in Pakistan is based on trucks and is very expensive. Furthermore, as trucks are overloaded beyond 50 tons, wear and tear of roads is very high. As such the government needs to develop a rail link to facilitate transport of steel to the north of the country. This will not only reduce cost of transport but will also save time.

Locating the steel industry in Pakistan Steel (PSM) dedicated downstream area will give companies an added advantage on both incoming and outgoing freight making exports much more viable. Port handling capacity and building a jetty in the steel SEZ must be considered, as large steel plants will need to import raw materials in bulk quantities.

L O G I S T I C S

power generation plants, as well as to build and operate water and gas supply systems to ensure higher productivity and market competitiveness. The private sector may be allowed to finance the infrastructure cost and obtain a tax credit for the amount. Such infrastructure will be required to facilitate the large amounts of raw materials, finished goods and other traffic movement that the zone will generate.

Currently Pakistan Steel has formed their national industrial park (NIP) on some of its land and it is proposed that all land in NIP and all free land around PSM should be allocated exclusively for the steel manufacturing industry. This land can be provided at concessional rates to genuine investors in the steel sector. Clear rules need to be framed in order to ensure that this land is be used for the stated purpose and hot commissioning be completed within a Stipulated timeframe of 2-3 years only.

Adequate water supply is essential for steelmaking. Keeping this requirement in view, the government should allocate water to the steel industry on priority basis. The government also needs to incentivize the setting up of reverse osmosis (RO) plants and also look to have a sea water desalination plant which could provide industrial quality water useable for steelmaking. The steel industry should in turn be required to pursue plans and strategies to achieve time-specific targets to reduce specific water consumption per ton of steel produced. Water conservation at all levels should be encouraged and the industry’s efforts should be supported.

W A T E R


Although steel manufacturing is an energy intensive process, the industry has made immense efforts over the last few decades and energy consumption today is half of what it was in the 1960s. However, the availability of energy has always been a hindrance for the growth and profitability of the industry. While it seems that availability of electrical energy may be eased in the short term with new power generation sources coming online in the next few years, the price of electrical energy is a major constraint in making the industry globally competitive. For e.g. it constitutes about 20% of the steel cost when employing the electrical melting route. Also, even though the influx of RLNG may solve some gas availability issues, the price will increase the cost of manufacturing in Pakistan and make our industry less competitive in the global arena. As Pakistan has shortage of power, it is proposed that all new steel manufacturing facilities have in-house power generation. The government should incentivize installation of co-generation power plants where the waste, heat and air produced as a result of the generation is used to produce free steam and chilled water, both of which are essential for steel production. In order to ensure cost effective electricity generation and distribution, the government should look to facilitate synchronizing of energy generated with the national grid as this allows the power generation to run at an efficient rate, which in turn would lower the rate of electricity generation to competitive levels. The steel industry, in view of high power peaks, should be facilitated by the government with the purchase and sale of electricity via synchronization of power plants to the national grid. Realistic time-specific targets for energy (gas, electricity) consumption per MT of steel production should be developed in consultation with all stakeholders.

Furthermore if the steel industry is set up in the Dedicated Pakistan Steel (PSM) downstream area then special LNG pipes can be laid from the new LNG terminals at Port Qasim directly to these mills. This needs to be facilitated by the LNG producers, SSGC and K-Electric.

P O W E R

All investments in the steel manufacturing sector must include investments in effluent treatment plants and air pollution mitigation. The bulk of the solid waste produced as a result of steel making is recycled and is therefore not a major concern. It should be made mandatory that all steel manufacturing companies have the ISO 45001 certification for environmental management systems. Apart from adherence to stringent energy efficiency parameters, the steel sector will be encouraged to assume best available practices and technologies to ensure a clean and green environment. PSQCA should be encouraged to develop in-house expertise in assisting manufacturers to obtain this certification. Greenhouse gas emissions should be controlled and targets for carbon dioxide emissions per MT of steel produced via the Blast Furnace Process and electrical melting process must be set in consultation with all stakeholders.

Steel is the world’s most recycled material. The recycling rate of steel is 86%

Almost 35% of new steel today is produced from old steel

Steel is very friendly to the environment

The life cycle of steel is potentially infinite, as its properties remain unchanged no matter how many times it is recycled

Steel has great durability, and compared to other materials requires relatively low amounts of energy to produce

The steel industry has made immense efforts to limit environmental pollution in the last decades. Energy consumption and CO2 emissions today are half of what they were in 1960’s

E N V I R O N M E N T A L M A N A G E M E N T


It is recommended that all investments in the steel sector be made with state of the art technology that is conducive to effective and efficient utilization of domestic resources. This is essential in order to gain a competitive advantage against the economies of scale of countries like China.

Steel companies will be encouraged to enter into strategic joint ventures for production and development of technologically advanced products. Transfer of technology for production of automotive steel and other special steels will be facilitated by helping set up JV’s with global leaders in such products. Specific indicators for productivity and wastage generation should be outlined and benchmarked against international norms. Targets should be discussed and agreed with all stakeholders for strict implementation.

T E C H N O L O G I C A L E F F I C I E N C Y

Owing to numerous advancements in steel technology and management techniques, the human resource requirements across whole spectrum of the industry have changed. Furthermore, quality human resource is intimately linked to higher productivity, production of globally acceptable products, higher profits and greater import opportunities. The local industry, however, continues to employ semi-skilled, self-trained labor force on shop floors in general and very rarely properly trained and qualified staff in supervisory and managerial positions. Owing to paucity of properly trained manpower, the productivity of the sector is well below the international bench mark. Through continuous education/ training programs, under the sponsorship of the Government, the quality of human resource can be raised to an acceptable level. It is also imperative to strengthen relevant institutions at various levels to enhance their capacity as well as create a quality human resource trained on new paradigm in line with international standards. The Government should support the industry to start quality training schools at various cities and towns offering competency based training in important domains of the steel processing and business promotion. As a short term measure, the facilities at PITAC and similar public sector centers may be made available to private sectors for training the existing workers of steel industry in collaboration with international qualification awarding entities such as City & Guilds (UK) to raise capable and motivated manpower for the industry. Further, exchange of experts with the friendly and neighboring countries can help in resolving this issue on fast track. The private sector shall also be encouraged to set up a cooperative fund

H U M A N R E S O U R C E D E V E L O P M E N T


All stakeholders of the steel industry should be brought under one platform to promote and conduct steel research, develop skill and expertise, as well as strengthen the synergy amongst the industry and academic institutes. The Government should encourage research institutes within the country to develop less resource and energy intensive steelmaking technologies as well as new products.

Pakistan Steels Metallurgical Training Centre should be funded by the government but managed by the private sector steel mills through the Steel Infrastructure Committee (SIC). This center should seek to give quality education in metallurgy and also provide hands on training supplemented with theory classes in order to develop a team of steel professionals. This center can issue diplomas in metallurgy as well as graduate/postgraduate degrees in metallurgy using the industry for their research and on-the-job training.

S T E E L R E S E A R C H & T E C H N O L O G Y

with annual contributions from the government for continuous education & training of supervisory, technical and managerial staff pertaining to the industry.

A SDC needs to be formed as a public private partnership. The Chairman of the committee should be from the private sector with at least 25 years of experience in the steel industry. The committee should consist of no more than five members, three from the private sector (one each from long products, flat products & tubes & Pipes), and one from the government preferably Secretary Industries and the last being the Managing Director of Peoples Steel Mill. The committee should meet monthly and should be responsible for approving all allocation of land at Pakistan Steel (PSM) dedicated downstream area for steel industry. The SDC should also be responsible for ensuring that all qualifications have been met by new investments in the steel sector for being eligible for the income tax incentive.

S T E E L D E V E L O P M E N T C O M M I T T E E ( S D C )

The enforcement of quality standards is a recurring theme in any segment of the steel industry. Since steel plays such a central role in the economy, reinforcing the nation’s infrastructure and housing as well as being a raw material for various other industrial sectors, the government must ensure that all steel units are in compliance with International standards.

The National Steel Advisory Council aims to spear head an initiative for Responsible Steel.

NSAC will aim to work closely with PSQCA and other institutions in order to form a standard and certification program for the domestic steel industry. The standard will be finalized during 2019, ensuring sustainability goals regarding availability of clean water, reducing greenhouse gas emissions, creating jobs that benefit individuals and communities, etc. This will bring about improvements across the sector, by encouraging those who could operate more responsibly to raise their game.

NSAC will either administer an independent third-party certification program or work with PSQCA for the steel value chain and define and promote steel that has been produced and sourced responsibly.

A special steel committee should be formed within the PSQCA (including members from ministry of science and technology, ministry of industries and production, EDB as well as distinguished personalities from the engineering community) to monitor the regular vigilance and testing of steel products manufactured locally. Moreover, PSQCA license should not be given to any manufacturer that does not have a testing laboratory (with minimum requirements to be set by the SDC) within the premises of the manufacturing unit.

Further, the PSQCA Act needs to be clarified to ensure foreign manufacturers should require a license from PSQCA to export to Pakistan for all items that are on the List of Compulsory Items, Appendix N. of the Import Policy Order. Since local manufacturers are required to obtain a license from PSQCA for such items, it only makes sense that foreign manufacturers should be subject to the same laws and conditions. For those items being imported which are not under the Mandatory List, the special committee on steel under the PSQCA to monitor the compliance to standards through laboratory testing at import stage.

NSAC will help fund and set up, possibly with PSQCA, state of the art Steel Testing laboratories that will provide the required independent world class testing facilities needed by the industry.

S T E E L S T A N D A R D E N F O R C E M E N T


Since it is aptly demonstrated that Pakistan needs to add domestic steel capacity, incentives for fresh investment in new plants or capacity addition of current units should be considered. Moreover, such incentives will counter the high cost of bringing basic infrastructure to any new manufacturing facility, which reduces the ROE on new investments given that the industry average for net profit percentage is merely 6-7%. Income tax incentives can be offered by extending the Section 65 of the income tax ordinance or creating a new section specifically for the steel industry where any investment in capacity addition of over PKR 3 billion and with a minimum 30% equity component would be eligible to a tax holiday for 5 years. The reason for adding a minimum investment criteria is because Pakistan requires new capacity addition in plants that have economies of scale and a PKR 3 billion investment in the steel industry will generally get you a plant that can produce quality products and is just on the brink of minimum economic scale. The income tax incentive will only be applicable if the units can demonstrate within the first year of operation that they have obtained third party certificates on health, safety and environmental compliance, e.g. ISO, OSHA etc. Moreover, such exemption will only apply to those companies that are either unlisted public companies or publicly listed companies to promote entities to be a part of the documented economy.

I N C O M E T A X I N C E N T I V E S

In recent years, the global demand slowdown and overcapacity resulted in historically low steel prices. Steel producers in China, Japan and Republic of Korea, where overcapacity exists, adopted a predatory pricing policy and began dumping their products in emerging markets, sometimes even operating at artificially depressed costs levels. This has seriously impacted Pakistan’s relatively nascent steel industry and the government should provide a level playing field for domestic producers. With current demand for steel in Pakistan estimated at 9 million MT per annum, and strong fundamentals in place for economic growth, the iron & steel sector is ready to “take-off” given the appropriate government and institutional support. As per the Pakistan Economic Survey 2017-18, domestic steel was the second highest growing sector with production growing by 30.85% in 2017-18 and 16.15pc in 2016-17. Apart from residential and infrastructure projects, the auto, energy and water transmission and general fabrication sectors have also made a strong contribution to demand for steel products.

Yet, local producers have to compete with global giants like China to meet the

T A R I F F A N D D U T I E S

domestic demand. It is however, pertinent to note that two days’ worth of steel production in China, is equivalent to Pakistan’s annual consumption of the same. Due to overcapacity in China, various countries have levied anti-dumping and countervailing duties against Chinese steel, whereas Pakistan on the other hand has signed an FTA with this global giant, allowing Chinese steel to be dumped into Pakistan at preferential duty rates at the expense of the domestic steel industry.As such it is necessary especially with the favors being given to China under CPEC to ensure local steel companies are given regulatory support in the form of regulatory duties (RD), anti-dumping duties (ADD) and countervailing duties (CVD) in order to protect the nascent domestic steel industry. Moreover, no concessions on duties and taxes should be given to any CPEC project for materials that are locally manufactured as that hurts business sentiment and enables duty free products to make their way to local markets.

Pakistan should use USA as a role model in implementing protection for its domestic industry. The prevailing tariff structure in Pakistan does not reflect the fundamental cascading principal, for some product lines, whereby tariff rates typically increase with the degree of processing of a product, which is meant to incentivize import-substituting manufacturing and discourage commercial imports that are draining foreign exchange. With respect to the above proposed tariff structure for steel products, it is essential for any successful import substitution policy to grant higher protection to higher value-added products to limit their imports and provide protection to domestic manufacturers of such products. Imports of these value-added products are then expected to be replaced by imports of low-value added raw materials, which are not a significant drain on a nations foreign exchange reserves. Countervailing (CVD) and regulatory duty (RD) should be imposed on import of those products that are made locally in sufficient quantity to be able to meet over 50% of domestic demand. These industries must also submit plans for enhancing capacity to progressively meet self-sufficiency ratios of at least 90% in the next 3 to 5 years. Given the ever-changing nature of the steel industry, the government should also work to prevent unfair trade practices. They must be vigilant and ready to conciliate in the market as and when required with trade remedial measures, to protect the interests of the domestic steel sector.

On the raw material side, customs and regulatory duties on basic raw materials such as scrap, iron ore and coal should be removed as these items are not available in sufficient quantity or quality locally, for steel making applications at the moment. Currently, iron ore and coal based steel making is non-existent in Pakistan’s steel landscape so removal of duties on at least iron ore will not hamper government revenue and will boost the local mining industry to provide iron ore and coal to the local steel industry (such as the case when Pakistan Steel was operational).

A large portion of the steel industry, particularly the long steel segment, is under the Sales Tax Special Procedures, 2007. The Special Procedures were introduced in 2007 only for rebars to aid the FBR in collection of sales tax from the steel industry and it has proven to be a successful formula in such terms, increasing revenue collection by many folds over the years. It is suggested that it should now include other long products such as billets as well as pipes and tubes. However, the Special Procedures has many anomalies and needs to be amended so that tax evasion can be curbed and vertical integration, particularly into power generation and iron ore based steel making, can be promoted. This will help the government with revenue collection and the industry with addressing key cost parameters to become more competitive.

S A L E S T A X S P E C I A L P R O C E D U R E S , 2 0 0 7



In recent times, robust demand and an annual industry growth of over 20% has allowed domestic producers to increase capacity utilization and new investments are underway. However, due to a lack of long term policy direction from the government and the recent losses incurred by the steel sector due to steel dumping from foreign manufacturers, investors are wary of taking large investment positions in the industry. It will be imperative to give certainty on tariff structure for the next 15 years until the government is able to reduce the high cost of doing business in Pakistan and the industry is able to ensure capital formation and invest in scale and technology via timely policy intervention by the government. Industry experts believe that with an aligned policy statement, the government can attract large investments that can add millions of tons of steel capacity in the country, thus enabling jobs, increasing government revenue and having a multiplier effect that would benefit all.

The country has sufficient natural resources needed to build and establish a steel industry based on new paradigms and responsive to local, regional and global challenges. The proven and estimated iron ore and coal deposits are sufficient to support such an initiative. It shall, however, require sizeable investments in the mining sector, development of infrastructure for access to already discovered deposits and usage of modern extraction and refining technologies. While the government is expected to fulfill its obligations in developing capable human resource, ensuring regular supply of raw materials, supporting research & development activities, encouraging substantial investments and creating consistent domestic demand and gradually removing supply-side constraints, the local private sector has to proactively play its role to revamp

the industry on modern lines without compromising on the obligations pertaining to conservation of environment and producing quality steel products for domestic as well as foreign markets.

On the whole, the local steel industry, in comparison to other developing countries, has to do a lot to become a vibrant and state-of-the-art industrial sector yielding high productivity on competitive price. It shall however require focused efforts and sincere action from policy formulation to its implementation by all the stakeholders. Import substitution policies should be supported by implementing a cascading customs and regulatory duty (RD) structure whereby the duty on raw material is less than that on value-added finished products. The creation of enabling and conducive conditions to ensure adequate availability of quality steel to wide range of consumers shall form the basis to achieve the Policy’s Objectives derived from its Vision.

To that end, the National Steel Policy (NSP) outlined in this document, is directed to address the sector-specific special concerns of the steel industry within the boundaries set by the overall macro-economic policy. The basic idea is to assist the industry to overcome various internal and external constraints to its growth. The Policy includes certain incentives aimed at stimulating the development of mining and steel production and processing sectors on fast track. Such incentives are also meant to encourage local and foreign investors keeping in view the prevalent financial and economic challenges the country and the world are facing. With the tremendous potential in Pakistan, adoption of such policies will catapult the local industry to greater heights.

CONCLUSION

Usage of steel should be encouraged in all buildings and structures. Efforts at government level to promote lifecycle costing in project evaluation, rather than looking at just the upfront cost in isolation should be encouraged.

No concessions on import duties or taxes be ensured under CPEC projects for any materials manufactured locally

Steel intensive designs and structures should be promoted in housing schemes.

Replacement benefits of existing bridges, pavements, etc. should be evaluated.

Efforts to be made to increase steel usage in making railway stations, foot over bridges, etc.

A policy on preference for domestically manufactured steel products in government procurements should also be implemented to lend necessary support to the domestic industry.

Deletion of engine and transmission components of the automotive industry.

Control on imports of semi-finished / finished auto parts and components, with an aim to achieve minimum 90% localization ratio of automotive parts within 3 years

Compliance to standards in the aftermarket


List of Key Recommendations

Make a tariff roadmap for the next 10-15 years based on cascading principle for steel products manufactured domestically

Remove duties and taxes on basic raw materials such as steel scrap, iron ore and coal

Amend the Sales Tax Special Procedures, 2007 to promote vertical integration and prevent tax evasion.

Form a special committee on steel at PSQCA that will enforce compliance to standards through licensing and vigilance

Offer 5 year income tax holiday to new investments in the steel sector that meet certain criteria as listed in the document

No concessions on import duties or taxes under CPEC for any materials manufactured locally

Facilitate steel units to invest in captive power generation and guarantee purchase of any excess power at a pre-agreed tariff

Create a Special Economic Zone (SEZ) for the steel industry where large tracts of land can be provided at concessionary rates along with necessary infrastructure such as jetty, rail network, desalination plant, and energy

The GoP must lead the mining and exploration of raw materials such as iron ore and coal, which are basic ingredients for steelmaking.

A N N E X U R E I A N N E X U R E I I

MaterialCategory

ProductCategory

HS Code Products

Raw Materials


Finished Products

7204

7203

2601

2701

7202

7207

7218

7224

7208

7209

7210

7211

7212

7225

7226

7219

7220

7213

7214

7215

7216

7217

7221

7222

7223

7227

Steel Scrap

Direct Reduced Iron (DRI), Hot Briquetted Iron (HBI)

Iron ore

Coking Coal

Ferro-Alloys

Billet, Bloom & Slab

Stainless Steel Ingots, Billets

Alloy Steel Ingots, Billets

Hot-Rolled Steel Coils & Sheets

Cold-Rolled Steel Coils & Sheets

Coated-Rolled Steel Coils & Sheets

Hot-Rolled & Cold-Rolled Steel Strips

Coated Steel Strips

Flat-Rolled Alloy Steel Coils & Sheets

Flat-Rolled Alloy Steel Strips

Flat-Rolled Stainless Steel Coils

Flat-Rolled Stainless Steel Strips

Bars & Rods, in Coils

Bars & Rods

Other Bars & Rods

Angles, Shapes & Sections

Wire

Stainless Steel Bars & Rods, in Coils

Stainless Steel Bars & Rods; Angles, Shapes & Sections

Stainless Steel Wire

Alloy Steel Bars & Rods, in Coils

Steelmaking Raw Materials

Semi-Finished Steel Products

Flat Steel Products

Long Steel Products


A N N E X U R E I I I

MaterialCategory

ProductCategory

HS Code Products

Raw Materials


Finished Products

7201

7205

7204

7203

2601

7202

7206

7207

7218

7224

7208

7209

7210

7211

Pig Iron

Pig Iron Granules

Steel Scrap

Direct Reduced Iron (DRI), Hot Briquetted Iron (HBI)

Iron ore

Ferro-Alloys

Ingots

Billet, Bloom & Slabs

Stainless Steel Ingots, Billets

Alloy Steel Ingots, Billets

Hot-Rolled Steel Coils & Sheets

Cold-Rolled Steel Coils & Sheets

Coated-Rolled Steel Coils & Sheets

Hot-Rolled & Cold-Rolled Steel Strips

Steelmaking Raw Materials

Semi-Finished Steel Products

Flat Steel Products

MaterialCategory

ProductCategory

HS Code Products

Finished Products

7228

7229

7304

7305

7306

7302

7307

7308

Alloy Steel Bars & Rods; Angles, Shapes & Sections

Alloy Steel Wire

Seamless Pipe

Spiral welded > 16" in Diameter

Longitudinally Welded ≤ 16" in Diameter

Rails or Track Construction Material

Tube & Pipe Fittings

Iron or Steel Structures or Parts thereof

Long Steel Products

Tube & Pipe Products

Other Miscellaneous Products

Product-wise imports, in Metric Tons (MT)

2013-14 2014-15 2015-16 2016-17 2017-18

12,255

1,010

2,000,735

5,266

98,390

24,863

7

31,546

2

1,375

671,950

185,722

337,986

11,017

15,386

1,546

3,028,057

13

197,522

30,523

42

83,207

36

47,621

319,007

226,200

430,080

14,441

22,967

2,376

4,007,102

-

9,500

28,116

1

47,134

154

32,142

626,809

310,015

598,379

16,929

32,266

2,212

4,248,446

6

-

42,256

318

19,837

76

9,194

803,606

277,563

592,471

144,770

32,966

3,027

5,283,114

1,359

78

72,583

14

5,201

59

1,463

829,661

346,935

630,147

286,938


MaterialCategory

ProductCategory

HS Code Products

Finished Products

7212

7225

7226

7219

7220

7213

7214

7215

7216

7217

7221

7222

7223

7227

7228

7229

7304

7305

7306

7302

7307

7308

Coated Steel Strips

Flat-Rolled Alloy Steel Coils & Sheets

Flat-Rolled Alloy Steel Strips

Flat-Rolled Stainless Steel Coils

Flat-Rolled Stainless Steel Strips

Bars & Rods, in Coils

Bars & Rods

Other Bars & Rods

Angles, Shapes & Sections

Wire

Stainless Steel Bars & Rods, in Coils

Stainless Steel Bars & Rods; Angles, Shapes & Sections

Stainless Steel Wire

Alloy Steel Bars & Rods, in Coils

Alloy Steel Bars & Rods; Angles, Shapes & Sections

Alloy Steel Wire

Seamless Pipe

Spiral welded > 16" in Diameter

Longitudinally Welded ≤ 16" in Diameter

Rails or Track Construction Material

Tube & Pipe Fittings

Iron or Steel Structures or Parts thereof

Flat Steel Products

Long Steel Products

Tube & Pipe Products

Other Miscellaneous Products

2013-14 2014-15 2015-16 2016-17 2017-18

5,131

218,841

1,669

75,568

6,363

36,091

20,281

1,864

10,206

14,864

40

3,035

1,418

35,389

7,114

1,927

111,882

2,069

26,523

806

105,090

84,660

4,152,955

3,851

661,653

8,461

98,714

7,003

61,971

14,502

1,531

32,945

18,978

83

4,034

1,071

33,345

19,884

1,898

117,076

52,898

26,749

9,107

110,737

131,687

5,811,859

4,676

705,584

3,095

96,537

5,368

47,536

33,614

1,880

34,576

13,926

30

6,606

1,548

51,963

108,125

809

109,205

62,615

36,171

7,447

104,160

191,371

7,328,466

5,257

565,481

3,618

116,684

5,131

38,010

91,617

1,900

21,882

11,422

12

6,787

2,057

86,676

41,917

1,089

133,242

32,035

32,858

59,623

121,363

300,769

7,852,451

8,778

624,413

3,514

134,291

6,529

44,133

46,536

1,407

35,049

14,303

79

9,346

2,987

131,790

45,244

1,644

145,765

24,068

28,002

23,072

139,695

258,478

9,222,668

A N N E X U R E I V


A N N E X U R E V

Roadmap for revival of PSM

A technical audit by an international company be effected in order to ascertain health of existing technical equipment and determine minimum startup costs.To benefit from economies of scale, a feasibility to determine capacity enhancement in stages from 1.1 to 3.0 million MT per annum be conducted.Conversion of billet into the bar mill be considered in view of the CPEC projects.Leasing/ Disposal of around 600 acres of land in downstream industrial area in sector III and IV of PSM be considered whereas 930 acres of land (given to NIP) be allotted to genuine parties who wish to setup industries on priority basis to generate funds for PSM.Surplus land in plant area, township, Gulshan-e-Hadeed, Lahore SMC, Islamabad, and FTC be considered for lease or sale in order to generate funds.Quota of natural gas for revival of the mill and clearance of SSGC liabilities be taken up with the GOP.The issue of current and long term liabilities be settled in consultation with all stake holders.Man power related issues including introduction of VRF and hiring of technical man power and their training be worked out in consultation with management of PSM. Hiring of Russian /Chinese/Ukrainian experts may be considered to train work force and to ensure smooth operation of the plant.Non-core activities like transport, security, township, guest house should be out sourced.Out sourcing of CMD departments be considered.Medical facilities including 100 bed hospital be out sourced.MTC with the help of public private partnership can be converted into a university for MSC classes in the field of metallurgy, material sciences. The center can also be used for training manpower in different trades.Water / power distribution, sewerage system in Gulshan-e-Hadeed is being managed by PSM. Being a non-core activity it is a burden on PSM resources. These facilities may be transferred to KWSB (water), city government (civic functions) and K-Electric (electricity supply).Disposal of finished goods inventory including surplus inventory in stores.

Hot Rolled Coil (HRC)

Cold Rolled Coil Hot Dip Galvanized Steel

Color Coated Steel

“The Pakistan steel sector is poised to invest in the latest technology, which will allow steel that is made in Pakistan, to be more cost-effective as compared to traditional steel producing countries.

Documents

Steel Policy copy - National Steel Advisory Council (NSAC)