New player enters Pakistan's steel segment

Hadeed Pakistan starts production, has capacity of 300,000 tons per annum

KARACHI: Hadeed Pakistan, a new entrant in the cold-rolled coil (CRC) segment of the steel industry, has recently started production in the relatively untapped northern part of the country.

According to JS Global analyst Arsalan Ahmed, the steel producer is based in Punjab and has production capacity of 300,000 tons per annum.

The new company has established its footprint in the north where no steel company has direct existence, he added. Pakistan’s total production of cold-rolled coils stands at 1.3 million tons per year, of which the demand is 700,000 tons.

“The surprising thing for all players is that the supply of cold-rolled coils in the country is two times compared to its demand,” Ahmed said. “Total production capacity for cold-rolled coils has risen to 1.3 million tons after the entrance of Hadeed Pakistan.”

He was of the view that owing to oversupply of the commodity, players in the steel segment might begin offering discounts on their sales. In the steel segment, International Steels produces one million tons of steel annually, of which the production of cold-rolled coils stands at 550,000 tons. On the other hand, Aisha Steel Mills produces 450,000 tons of cold-rolled coils on a yearly basis.

Hadeed Pakistan chose to invest in the steel business keeping in mind that the two existing steel companies were based in Karachi and catered to demand from across the country from the port city.

“The establishment of the new company will be beneficial from the customer’s point of view if not from the company’s point of view,” said Ahmed.

According to the rates announced by the company, a 1mm cold-rolled coil is priced at Rs110,525 per ton, which is nearly the same price as that for the existing players.

“The setting up of a new enterprise in Punjab will save transportation cost for customers in the northern part of the country,” said the analyst. According to the analyst, “when industries order steel from the two existing players, their cargo can be delayed”. In such conditions, the company has a fair chance to win customers in northern areas despite the fact the supply is almost two times than demand in the country, he said.

Published in The Express Tribune, February 27^th, 2020.

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