Karachi:
After many years of muted activity and marginpress, Pakistan’s long steel sector is expected to arrange a gradual improvement from FY26 onwards, bent by the Government’s emergency relief measures, federal infrastructure costs, lower raw material tasks and to some extent restructuring demand for devastating floods.
However, this recovery is not exported or efficiency driven. Instead of improving competitiveness in the global markets, it can add pressure to the country’s external report, as higher domestic demand for long steel will inevitably increase the import of raw materials such as steel scrap and semi-finished products, as happened around 2015.
For the past several years, the long -steel industry has been under strain due to weak demand, high financing and energy costs and macroeconomic headwinds. The sector’s results on Pakistan Stock Exchange (PSX) have also limped wider indexes. However, analysts at Taurus Securities are now seeing signs of a reversal, citing political incentives, improved construction views and cost rationalization.
The federal budget FY26 has provided considerable relief for long steel manufacturers. Customs on key inputs such as steel scrap and semi-finished products have been cut. Additional duty duty on steel scrap has been reduced from 2% to 0%, while the duty of the molten scrap is reduced from 3% to 0%. In addition, the duty of duty on semi-finished products such as tickets has been halved from 11% to 5%, making conversion to reinforcing iron more cost-effective.
In addition, the government has announced a Mark-up grant of RS5 billion. Such measures are expected to drive demand for housing, especially among the middle class, which now make up about 50-60% of the population. At the same time, the government has imposed VAT on FATA/PATA regions, which ends exceptions that undocumented players have previously utilized. Revenue tax will gradually increase from 10% in FY26 to 16% in FY29, creating a more level rules for documented suppliers.
The recent floods over Punjab and Sindh are expected to create significant demand for building materials. Unlike FY23, when reconstruction after river did not translate into higher cement and steel volumes due to poor financial conditions, analysts expect the current macroeconomic stability and fiscal support to enable a stronger response, according to a report prepared by Mustafa Mustansir and Asad Qureshi at Taurus Securities. National Public Sector Development Program (PSDP) Awarding FY26 is set to RS4.2 trillion, with significant resources earmarked for infrastructure projects. Analysts believe that this combined with rehabilitation work in flooded areas will increase demand for long -steel products, especially reinforcing iron.
Since FY17, Pakistan has maintained high anti-dumping tasks on finished steel import such as reinforcing iron and wire bars. Effective degree of protection increased to 123% in FY25, where the shelter players protect exports. According to the new national customs policy, the government plans to rationalize duties over the next five years and reduce the effective protective rate to 50-60%. This shift is intended to promote export competitiveness rather than import substitution and adapt to the wider target of export -led growth.
Among listed companies, Mughal Iron & Steel (Mughal) stands out with a positive sight. The company is set to benefit from the budget duty’s exemption, marking grants and demand for flooding, especially in Punjab. Mughal’s 36.5 MW caught hybrid power plant is also planned for commissioning in 2qfy26, which will reduce energy costs by almost 20% and support margins. On the other hand, Amreli Steels Ltd (ASTL) faces material uncertainty due to weak demand, violations of the loan covenant and suspension of the rolling mill operations that account for 30% of capacity. The company is negotiating a debt structure plan and is investigating the sale of asset to strengthen liquidity.
Agha Steel Industries (AGHA) is also recovering from violations of financial covenant following a fire event in 2023. The management is negotiating a restructuring agreement with lenders who would lock RS385 million in insurance requirements. With production restored and funds injected by sponsors, Agha expects progress with its MI.Da project, which can support long-term growth.
