Karachi:
After years of moderate activities and pressure on the margins, the long -term Pakistan sector should stage a gradual resumption of exercise 26, supported by government rescue measures, federal infrastructure expenses, weaker raw material tasks and, to a certain extent, demand led by reconstruction in the wake of devastating floods.
However, this recovery is not directed by export or focused on efficiency. Instead of improving competitiveness on the global markets, it can add pressure to the external account of the country, because higher domestic demand for long steel will inevitably increase imports of raw materials such as steel scrap and semi-finished products, as happened around 2015.
In recent years, long -term industry has remained under pressure due to low demand, high funding and energy costs and macroeconomic opposite. The performance of the sector on the Pakistan Stock Exchange (PSX) has also changed wider indices. However, Taurus Securities analysts now see signs of a turnaround, citing incentives for policy, improvement of construction perspectives and cost rationalization.
The federal budget Fy26 has provided significant relief for long -term manufacturers. Customs tasks on key entries such as steel scrap metal and semi-finished products have been reduced. Additional customs duties on steel scrap has been reduced by 2% to 0%, while scrap rights have been reduced from 3% to 0%. In addition, customs duties on semi-finished products such as billets has been reduced by 11% to 5%, which makes the conversion to Barais more profitable.
In addition, the government has announced a marking subsidy of 5 billion rupees to stimulate construction, as well as tax credits on mortgage payments and incentives to low -cost housing projects. Such measures should stimulate the demand for housing, especially among the middle class, which now represents around 50 to 60% of the population. At the same time, the government has imposed the sales tax on Fata / Pata regions, ending the exemptions that undocumented players have already exploited. The sales tax will gradually go from 10% during the year 26 to 16% during financial year 29, creating a playground more level for documented suppliers.
Recent floods through Punjab and Sindh should create a substantial demand for building materials. Unlike Fy23, when post-invitation reconstruction has failed to result in higher cement and steel volumes due to poor economic conditions, analysts expect current macroeconomic stability and tax support allow a stronger response, according to a report prepared by Mustafa Mustansir and Asad Qureshi in Taurus Securities. The Allowance of the National Public Sector Development Program (PSDP) for the 2010 financial year was set at 4.2 rumber of rupees, with significant resources allocated to infrastructure projects. Analysts believe that, associated with rehabilitation work in areas affected by floods, will increase the demand for long -term products, in particular reinforcement bars.
Since the 2017 financial year, Pakistan has maintained high anti -dumping rights on finished steel imports such as reinforcement bars and metal stems. Effective protection rates increased to 123% in financial year 25, protecting domestic players but harming exports. Under the new national prices policy, the government plans to rationalize tasks over the next five years, reducing the effective protection rate to 50 to 60%. This change is intended to promote the competitiveness of exports rather than the substitution of imports, aligning the wider objective of the growth led by export.
Among the listed companies, Mughal Iron & Steel (Mughal) stands out with a positive perspective. The company should benefit from budgetary alleviations, increase subsidies and the demand for the reconstruction of floods, in particular in Punjab. The 36.5 MW Captive Hybrid Central of Mughal 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 significant uncertainty due to the low demand, violations of the loan clause and the suspension of site operations, which represent 30% of the capacity. The company negotiates a debt restructuring plan and explores asset sales to strengthen liquidity.
Agha Steel Industries (AGHA) also recalls violations of the financial closure after a fire in 2023. The management negotiates a restructuring agreement with lenders, which would unlock 385 million rupees in insurance complaints. Restored production and funds injected by sponsors, Agha provides for progress in its MI.DA project, which could support long -term growth.
