20 January 2012

Pakistan still amongst the lowest per capita steel consumers - Report

Gulf Today reported that strong economic growth over the last decade has directly resulted in an increase in demand for steel by various sectors such as the manufacturing and construction industries, both of which have exhibited growth over the last 5 years.

However, Pakistan is still amongst the lowest per capita consumers of steel at 37 kilogram in comparison to the regional average of 207.8 kilogram and world average of 181.5 kilogram, presenting an opportunity for the steel sector to grow manifold and for investors to tap into a largely unexplored market with significant upside potential.

The organised sector comprises corporate which cumulatively have an annual production capacity of up to 1.3 million tonnes. The actual capacity utilization is limited to 17.4% due to the fact that approximately 60% of the total available capacity is yet to achieve commercial operations.

Pakistan Steel Mills which currently has a production capacity of 1.1 million tonnes is running inefficiently at a capacity utilization of 43%. This sector is fragmented with an estimated 100 units operating in the country. Total installed capacity of smelters is estimated at approximately 2.7 million tonnes per annum.

This segment re melts scrap to produce cast billets and thin ingots. Major raw materials include both imported as well as locally generated scrap recovered from ship demolition, obsolete machinery, automobiles etc. It is estimated that the unorganized sector operates at 74% capacity thus contributing approximately 2 million tonnes per annum to the steel production.

Pakistan has historically relied heavily on imports of steel from various countries to meet its growing local demand. As per the statistics provided by the State Bank of Pakistan, approximately USD 830 million worth of iron and steel products have been imported during the half year July to December 2010. It is estimated that this figure will grow to approximately USD 1,700 million for the fiscal year ended 2011.

Analysis of import composition reveals that the 2 most dominant imports are sheets and iron scrap which cumulatively account for 80% of the total value imported and individually account for 42% and 38% respectively. Imports are mainly procured from producers in the USA, UK and China which cumulatively account for approximately a quarter of the total imports.

Source: Steel Guru. (Sourced from www.gulftoday.ae). 20 February 2012

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