Pakistan is the World's Fastest Growing Steel Producer

[Riaz Haq]

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

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

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

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

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

World Steel Production. Source: WorldSteel Association

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

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

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

World Steel Trade. Source: WorldSteel Association

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

Related Links:

Haq's Musings

CPEC is Transforming Least Developed Parts of Pakistan

Per Capita Income in "Failed State" of  Pakistan Rose 22% in 5 Years

Credit Suisse Wealth Report 2017

Pakistan Translates GDP Growth to Citizens' Well-being

Rising Motorcycle Sales in Pakistan

Depth of Deprivation in India

Chicken vs Daal in Pakistan

China Pakistan Economic Corridor

ADB Raises Pakistan GDP Growth Forecast

[Riaz Haq]

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

https://www.businessinsider.com.au/pakistan-house-price-boom-2011-2...

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

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

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

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

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

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

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

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

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

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

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

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

The country’s housing shortage is most likely part of a longer-term trend, with Pakistan’s urban population expected to grow by around 30 million people by 2027.

[Riaz Haq]

Pakistan's capacity utilisation stands 91%
07 March 2018

https://www.cemnet.com/News/story/163604/pakistan-s-capacity-utilis...

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

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

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

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

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

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

"Moreover, import of cement should not be allowed until Pakistan Standards and Quality Control Authority certifies the quality of cement being imported into the country," the association added.

[Riaz Haq]

#Pakistan #automobile sales jump 23% in first 8 months of FY 2017-18 to 170,354 cars. 
#manufacturing https://www.dawn.com/news/1394949


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

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

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

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

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

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

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

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

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

[Riaz Haq]

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

https://www.thenews.com.pk/print/293334-lsm-growth-speeds-up-9-44pc...

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

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

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

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

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

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

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

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

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

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

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

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

“The performance was encouraging as, barring fertiliser, all segments contributed positively,” the central bank said in a report. “While cement and steel industries benefitted from the ongoing infrastructure and construction activities, production of white goods was aided by the rising domestic demand.”

[Riaz Haq]

The International Steel Limited (ISL) has commenced production from its new plant, increasing the rolling capacity of the company by 1,000,000 metric tons.

https://www.brecorder.com/2018/06/28/425413/international-steel-sta...

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

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

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

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

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

[Riaz Haq]

From Steel Statistical Yearbook 2017

Pakistan Steel Consumption 42 Kg per capita 2016

India 72.3 Kg per capita

Bangladesh 25.7 Kg per person

China 504.9 Kg per person

Japan 528.4 Kg per person 

UAE 518.5 Kg per person

USA 318.4 Kg per person

Germany 522.5 Kg per person

Sudan 9.0 Kg per person

https://www.worldsteel.org/en/dam/jcr:3e275c73-6f11-4e7f-a5d8-23d9b...

[Riaz Haq]

#Pakistan 2016 Per Capita #Steel Consumption: 42 Kg, #India 72.3 Kg, #Bangladesh 25.7 Kg, #China 504.9 Kg, #Japan 528.4 Kg, #UAE 918.5 Kg, #USA 318.4 Kg, #Germany 522.5 Kg, #Sudan 9.0 Kg https://www.worldsteel.org/en/dam/jcr:3e275c73-6f11-4e7f-a5d8-23d9b...

[Riaz Haq]

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

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

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

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

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

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

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

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

“Further, production lagged behind expectations which we think would be due to new Dhabeji rolling plant operating at utilisation levels lower than that were envisaged for May/June 2018 and SITE rolling plant operating at lower capacity of 60 percent throughout the quarter (due to power shortages),” he added.

[Riaz Haq]

Carbon Steel Welded Pipes: #Canada slaps anti-dumping duty on #Pakistan’s CSWP product. A provisional duty of 10.1% was imposed on IIL (International Steel) and 58% on other #Pakistani exporters. #Steel #exports https://tribune.com.pk/story/1843381/2-steel-pipes-canada-slaps-ant...

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

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

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

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

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

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

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

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

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

[Riaz Haq]

Pakistan steel industry will meet future demand

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


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

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

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