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Steel Industry

Overview
• The manufacturing units registered in
the sector are 599 in 2005-06.
• only 8-10 automatic steel plants
producing quality steel products while
over 350 units manually operated are
producing low quality products.
• The PSM steel company is planning to
augment its production capacity from
the existing 1.1 million tons per year
to 5 million tons per year

Demand Factors
• Industrial growth
• Construction
• Automobile
• fiscal year 2007-08, Pakistan’s
annual steel requirement was about
five million tons while domestically
it produced 3.75 million tons.

Demand Factors
• Surgical instruments
• Economic recovery
• gap is filled through imports from
different countries including Russia,
Ukraine, Egypt and South Africa.
• HMC taxila
Supply factors
• Expected high demand
qrecovery of auto sector
qRecovery from recession
• Inc in price of coal
• Inc in price of cars
Microeconomic factors
qLabour
• Cheap
• Largely unskilled
qCapital
• Large amount of capital required
qTechnology
• Mostly obsolete technology
• Imported
• New entrants bringing in new
technology
Microeconomic factors
qResources
• Raw materials mostly imported
• Gets power from KESC affected by
load shedding

Macroeconomic factors
qInflation
• Raised prices of cars
qInc in international price
qCorruption
INTEREST RATES

• Expansion has become difficult due to high
interest rates

• Decline in available cash for payouts

• Supporting industries are not investing in
development projects

1
Govt regulations and
policies
National Steel Policy
• The policy aims to bridge supply-
demand gap by achieving steel
production of 15 million tonnes by
2020
• Under this initiative, the private
sector would be encouraged to
invest in these areas
• hey would be provided special
incentives like cut in duty or zero
duty on imports, provision of land
and other infrastructure facilities,
National Steel Policy
• The areas, where the government
wants to produce steel, are Makerwal-
Sho (Mianwali) having iron ore
reserves of 706m tons, Chichali-
Chughlan (Mianwali) 369m tons, DG
Khan (56 million tons) and Chiniot
17m tons. These are located in
Punjab. In Balochistan, Pachinkoh
(Nokundi) has iron ore reserves of
45m tons, Chigendik (Nokundi) 5m
tons, Chilghazi (Dalbandin) 2.47m
tons and Dilband (Mastung, Kalat)
200m tons. Besides, in NWFP, Pezu
(DI Khan-Bannu) bristles with reserves
Raw Material
• Pakistan has more than 1.42 billion tonnes
of proven iron ore reserves
• 947 million tonnes were spread in Punjab
(Sargodha and Kalabagh), North West
Frontier Province (NWFP) (Nizampur and
Hazara), Balochistan (Kalat and Chaghi),
which contain 20 to 60 per cent iron
• Brazil, Australia and others
• Tuwairqi Steel Mills Ltd aggressively
planning to develop iron ore sites in
Balochistan in order to reduce
dependence on imports.
• Presently, we are buying coal from Australia
and Canada and iron ore from India and
China
PEST
qPolitical
• The government had increased sales
tax from 15 to 20 percent on import
of scrap/ingot (2008)

Strength

• Cheap labor

• Low cost

Weakness
• High cost of energy

• Poor infrastructure.

• Lack of R&D investment


• Dependence on imports for steel


manufacturing equipments and
technology

Opportunities
• Govt. has decided to increase the
production capacity from 1.1ton to
20 million tons by 2020.

• Govt. decreased 20% GST

• The large iron ore and coal reserve of
Pakistan provide good opportunity
in the steel sector for enterprising
investors.
Opportunities
• The steel price, which touched Rs95000
per ton at one time, is now touching rock
bottom even below Rs45000 tons
primarily due to adequate supply of iron
sheets from Gaddani's ship breaking
industry where over 28 ships are waiting
in queue for breaking.
• The country's per-capita steel consumption
is only 30 kilograms compared with
China's 384 kilograms

Opportunities
Threats
• Slow growth in infrastructure
development

• Possibilities of export growth from


China


Thtreats
• sector protected of international
price shocks, fear of reduced
supplies, high sea freight, carrying
costs and logistic problems
• one million ton of quality steel is
lying with the banks that sponsored
those projects and are now
disposing off this steel at force or
throwaway prices.