Report highlights raw material shortages, import dependency, political uncertainty among the challenges facing the industry
PSM must pay billions in dues to SSGC before the gas pressure to the steel mills is restored. PHOTO: REUTERS
The Competition Commission of Pakistan (CCP) has recommended the creation of a separate Ministry of Steel along with the formulation of a National Steel Policy.
These measures aim to help address competition-related issues, barriers to market entry for new investors and other challenges facing the steel industry.
A report on the state of competition in Pakistan’s steel sector has also been issued by the CCP, which shows that the country’s manufacturing sector accounts for 71% of total exports and employs nearly 15% of the workforce.
It further highlights that the large manufacturing industry contributes to 69% of the manufacturing sector’s output and 8.2% to the national GDP.
The report states that domestic steel production in fiscal year 2024 was 8.4 million tons, including 4.9 million tons of long steel and 3.5 million tons of flat steel.
Imports of steel scrap amounted to 2.7 million tonnes, reflecting heavy reliance on external sources of raw materials. The country’s steel consumption per per capita, however, was only 47 kg, which indicates sluggish industrial and construction activity.
Furthermore, the report revealed that up to 50% of the steel available in the market is of substandard quality.
Demand for steel in Pakistan is primarily driven by infrastructure development, urban population growth, industrial expansion and major projects such as the China-Pakistan Economic Corridor (CPEC).
On the supply side, the industry faces challenges, including raw material shortages, dependence on imports and the energy crisis.
Pakistan Steel Mills, once an important national asset with an annual production capacity of 1.1 million tonnes, has been out of business since 2015, with liabilities of over Rs 400 billion.
In contrast, countries such as China, India and Russia have achieved significant progress in the steel sector through government subsidies, technological innovation and large-scale investment.
Furthermore, tax exemptions in regions of the erstwhile Federally Administered Tribal Areas (FATA) and Provincially Administered Tribal Areas (PATA) have resulted in around 1.5 million tonnes of untaxed steel being transported back to settled areas, causing an estimated loss of Rs 40 billion. to the national treasury.
The CCP’s recommendations
The report recommends exploration and mining of local coal and iron ore reserves using modern technology. It also urges the adoption of energy efficient production methods.
The CCP highlighted regulatory weaknesses, noting that new investors face hurdles in doing business, while frequent changes through statutory regulatory orders (SROs) create uncertainty in the sector.
To improve the sector, the report recommends revising and stabilizing the national steel policy, rationalizing tax rates and taking action against dumping practices.
It calls for strengthening the Ministry of Industry and Production, ensuring the implementation of quality standards for steel production and registering unlisted small steel units.
The CCP further proposes to end tax exemptions in the former FATA/PATA areas, promote the use of technology to improve production quality and reduce costs, encourage iron ore mining, expand value addition and green technologies.
