Report highlights raw material shortages, import dependence and political uncertainty among challenges facing industry
PSM must pay billions owed to SSGC before gas pressure to steelworks is restored. PHOTO: REUTERS
The Competition Commission of Pakistan (CCP) has recommended the establishment of a separate ministry of steel as well as the formulation of a national steel policy.
These measures aim to help resolve competition-related issues, market entry barriers for new investors and other challenges facing the steel industry.
A report on the state of competition in Pakistan’s steel sector was also released by the CCP, showing that the country’s manufacturing sector accounts for 71% of total exports and employs almost 15% of the workforce.
Furthermore, it highlights that large-scale manufacturing contributes 69% of manufacturing sector output and 8.2% of national GDP.
The report said that in fiscal year 2024, domestic steel production amounted to 8.4 million tons, including 4.9 million tons of long steel and 3.5 million tons of flat steel.
Imports of scrap steel amounted to 2.7 million tonnes, reflecting a high dependence on external sources of raw materials. However, the country’s per capita steel consumption stands at only 47 kilograms, indicating sluggish industrial and construction activity.
Additionally, the report reveals that up to 50% of the steel available on the market is of substandard quality.
Steel demand in Pakistan is mainly 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 such as shortage of raw materials, dependence on imports and energy crisis.
Pakistan’s steel mills, once a vital national asset with an annual production capacity of 1.1 million tonnes, have remained non-operational since 2015, with liabilities exceeding 400 billion rupees.
In contrast, countries such as China, India and Russia have made significant progress in the steel sector thanks to government support, technological innovation and large-scale investments.
Besides, tax exemptions in the former Federally Administered Tribal Areas (FATA) and Provincially Administered Tribal Areas (PATA) regions resulted in transportation of around 1.5 million tonnes of untaxed steel to populated areas, resulting in an estimated loss of Rs 40 billion to the national exchequer.
CCP recommendations
The report recommends the exploration and exploitation of local coal and iron ore reserves, using modern technology. It also recommends the adoption of energy-efficient production methods.
Highlighting regulatory weaknesses, the CCP observed that new investors face obstacles in doing business, while frequent changes brought by Regulatory Orders (SROs) create uncertainty in the sector.
For the betterment of the sector, the report recommends reviewing 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 small unlisted steel units.
The CCP further suggests ending tax exemptions in erstwhile FATA/PATA zones, promoting the use of technology to improve production quality and reduce costs, encouraging iron ore mining, increasing value addition and green technologies.
