The report highlights shortages of raw materials, dependence on imports and political uncertainty among the challenges facing the industry
PSM needs to pay billions in installments to SSGC before gas pressure to steel mills is restored. PHOTO: REUTERS
The Competition Commission of Pakistan (CCP) has recommended the establishment of an independent Ministry of Steel along with the formulation of a National Steel Policy.
These measures are intended to help address issues related to competition, market entry barriers for new investors and other challenges facing the steel industry.
The PCC also released a report on the state of competition in Pakistan’s steel sector, showing that the country’s manufacturing sector accounts for 71% of total exports and employs nearly 15% of the workforce.
Furthermore, it highlights that the large-scale manufacturing industry contributes 69% of the production of the manufacturing sector and 8.2% of the national GDP.
The report states that in fiscal year 2024, domestic steel production amounted to 8.4 million metric tons, including 4.9 million metric tons of long steel and 3.5 million metric tons of flat steel.
Steel scrap imports amounted to 2.7 million metric tons, reflecting heavy dependence on external sources of raw materials. However, the country’s per capita steel consumption was only 47 kilograms, indicating sluggish industrial and construction activity.
Furthermore, the report revealed that up to 50% of the steel available on the market is of inferior quality.
Demand for steel 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 including shortages of raw materials, dependence on imports and the energy crisis.
Pakistan Steel Mills, once a vital national asset with an annual production capacity of 1.1 million tonnes, has not been operational since 2015, with liabilities exceeding Rs 400 billion.
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 investment.
Furthermore, tax exemptions in regions of the former Federally Administered Tribal Areas (FATA) and Provincially Administered Tribal Areas (PATA) have resulted in around 1.5 million tonnes of duty-free steel being transported back to populated areas, causing an estimated loss of Rs 40 billion to the national exchequer.
PCC Recommendations
The report recommends the exploration and extraction of local coal and iron ore reserves, using modern technology. It also calls for the adoption of energy-efficient production methods.
Highlighting regulatory weaknesses, the CCP observed that new investors face hurdles in doing business, while frequent changes through Statutory Regulatory Orders (SROs) create uncertainty in the sector.
For the improvement of the sector, the report recommends reviewing and stabilizing the National Steel Policy, rationalizing tax rates and taking measures against dumping practices.
It calls for strengthening the Ministry of Industries and Production, ensuring the implementation of quality standards for steel production and registering small unlisted steel units.
The PCC further suggests ending tax exemptions in the former FATA/PATA areas, promoting the use of technology to improve production quality and reduce costs, encouraging iron ore extraction, expanding value addition and green technologies.
