Steel producers offer discount as demand falls

Step taken to compete with cheaper imported coils

KARACHI: Owing to declining demand coupled with a slowdown in the international market, steel producers in Pakistan are offering a discount of Rs5,000 per ton on the sale of flat steel.

"Producers of flat steel namely International Steels and Aisha Steel Mills have started offering a discount of Rs5,000 per ton on both cold-rolled coils as well as hot-dipped galvanised coils," stated JS Global in its research report on Friday.

Prior to the discount, the prices of cold-rolled coils and hot-dipped galvanised coils were hovering at Rs108,500 and Rs115,850 respectively.

Any steel sector strategy without PSM cannot work

"The decision has been taken mainly keeping in view the availability of cheaper coils, imported from South Africa and Europe, in the local market," said JS Global analyst Arsalan Ahmed.

Aisha Steel Mills produces 1.7 million tons of flat steel per annum while International Steels produces 1 million tons, added the analyst. "Despite the massive supply, the demand for flat steel stands around 1.2 million tons per year," he said.

Recently, Aisha Steel Mills added a new plant with total capacity of 700,000 tons per annum.

On the other hand, global steel prices are falling on the back of a prolonged US-China trade war, therefore, the massive discount seems to be an impact of the international situation on Pakistan's market. In early September, steel scrap prices in the global market dropped over $50 while in the past 10 months, the prices dipped $238 per ton.

"Earlier, Pakistan used to import 30-40% of flat steel but recently the number has dropped substantially due to the government's import substitution policy," said Ahmed. "Under the new policy, the importer is supposed to present his CNIC and other documents to the government."

Al-Tuwairqi Steel Mills dispute lands in international court

On the other hand, wholesalers, who buy from the importers, are also supposed to do the same.

Demand in the domestic market has fallen due to an overall slowdown in the national economy. However, imports are expected to increase once the economy recovers and steel demand rises. Flat steel is used in doors, windows and pipes besides for some other purposes. "Both national and international scenarios are forcing the two flat steel players to attract their customers through discount," said the analyst.

Published in The Express Tribune, November 2^nd, 2019.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.