Pakistan’s steel sector has reached a decade low as scrap steel imports have nosedived by 55 percent year on year (YoY) amid a low level of activity in the construction sector.
The Pakistan Association of Large Steel Producers (PALSP) leadership called an emergency meeting to address the current crisis. The steel industry leadership expressed profound concerns about the ongoing industrial as well as economic situation as they were worried about rupee depreciation, depleting foreign reserves and curbs on LCs, and a significant rise in the cost of production, according to Wajid Bukhari, Secretary General of PALSP.
Steel rebar manufacturers have raised rebar prices by about Rs. 33,000 per ton since early January due to LC restrictions, despite a global drop in scrap prices. PALSP data shows that steel scrap import is down by a record 55 percent year on year (YoY) to 191,000 MT. According to Bukhari, this is the sharpest YoY drop in the last ten years, implying massive industrial shutdowns.
This means that the country will likely face a severe steel shortage in February and March. If the administrative restrictions imposed by the State Bank of Pakistan (SBP) last more than four business days, the price of steel rebar may exceed Rs. 280,000 per ton.
The import of scrap in December 2022 was only $100 million, accounting for less than 2 percent of Pakistan’s total import bill. However, if imports are not permitted, it will result in the closure of construction industries and all related industries, including cement, cables, and tiles, displacing at least 7.5 million people, according to Bukhari.
The PALSP secretary general said major steel industry players have expressed their concerns about restrictions on the opening of LCs because they believe that the steel sector is the backbone of the economy and one of the country’s leading exporting sectors. In light of the current issues faced by the country, manufacturers have urged the government to support the steel industry and help it recover from the LCs crisis.
