Amreli Steels to invest Rs6.5b in third-phase expansion

Production capacity will almost double to 1.1 million tons

KARACHI: Amreli Steels Limited has planned to invest Rs6.5 billion in the third phase of its expansion at Dhabeji to expand its rebar manufacturing facilities, which will help increase the company's present production of 605,000 tons per annum to 1.1 million tons.

This new investment plan, subject to the approval of technical feasibility and successful financial close, is set to almost double the production capacity. It is expected to be completed in three years after achieving financial close, according to the company.



"The company is expanding in anticipation and to cater to mostly domestic demand," Amreli Steels CEO (Strategy) Hadi Akberali told The Express Tribune. "We are currently the Pakistan's largest rebar company and we will consolidate our position after the expansion."

The company will be financing the estimated cost of expansion - Rs6.5 billion - through bank borrowing and internal cash resources.

"Internationally reputed consultancy firms have been invited to submit bids for final selection to commence technical feasibility of the proposed project," the company announced in its notice to the Pakistan Stock Exchange (PSX).

By installation of the new facility, the company aims to possess the largest capacity in Pakistan for producing rebars with economies of scale in terms of conversion cost.

Meanwhile, during a meeting of the board of directors, it decided not to revamp its existing SITE rolling mill due to the planned expansion at Dhabeji. There would be no shutdown for 10 months, which was announced from June 2019 to March 2020, after the company decided against the revamp of its existing SITE rolling mill.

According to Pak-Kuwait Investment Company AVP Research Adnan Sami Sheikh, the demand for steel will rise in coming years as the country gears up to construct 5 million houses under the prime minister housing scheme as well as a few major dams to stave off an anticipated water crisis.



Sheikh added that from a conservative point of view, each of the low-cost houses to be constructed under the PM scheme will need 2 tons of rebar for its construction. If Prime Minister is able to achieve the target of constructing 5 million houses in five years, it will at least create demand for 10 million tons of steel.

Meanwhile, a single dam requires 150,000-200,000 tons of steel annually and its construction takes five to seven years. Therefore, the analyst believes the company is most probably expecting a surge in domestic demand from these two potential avenues. Amreli Steels' stock rose 2.54% and stood at Rs67.81 at the end of trading at the PSX on Friday. The company saw trading in 281,000 shares.

Published in The Express Tribune, November 10^th, 2018.

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