Amreli Steels shelves plan for joint venture with Chinese firm

KARACHI: Amreli Steels in a bourse filing on Monday said it has shelved plans for a partnership with a Chinese firm in an electrical transmission equipment project.

The company deliberated and pursued the proposal with Qingdao Huijintong Power Equipment Company Limited (HJT), which subsequently came across certain obstructions resulting in the cessation of the said venture, Amreli said in its statement to the Pakistan Stock Exchange.

“Therefore, the company and HJT have now mutually agreed that they will not continue with the proposed joint venture agreement,” the company note said. Analysts had then estimated the total value of the now shelved joint venture at Rs1.6 billion. The Chinese company is listed at the Shanghai Stock Exchange and principally engaged in the research, design, manufacture and distribution of transmission line towers within and outside China.

Amreli announced the planned venture in November last year to produce and sell electrical transmission equipment in the country to meet the growing demands of the energy sector. Analyst Saad Bin Ahmed at Arif Habib Limited said the steelmaker did not give any reason behind cancelling the agreement.

The company was expected to setup a higher capacity plant of 100,000 tons, however, the management was confident to manage with 30,000 tons. This, he said would have required more CapEx and possibly lower capacity utilisation later.

“Under the China-Pakistan Economic Corridor (CPEC) Phase 1, Pakistan has built the power generation capacity but there is a long way to go for construction and repair of transmission and distribution network,” the analyst said, and added that this new venture would have resulted in guaranteed sales on account of construction of numerous transmission towers.

Currently, the steelmaker has an annual steel rebar manufacturing capacity of 180,000 metric tons. It produces high quality billets in melt shop. The company planned to more than double its steel-melting capacity given a loud steel demand in the country.

Amreli’s board, earlier this year, had approved the second phase of expansion to increase its annual production capacity of reinforcement bars to 750,000 tons within the next two years. The total cost of the expansion is estimated at Rs2.0 billion.

The company will expand its plant located in Sindh Industrial Trading Estate by 95,000 tons/annum, taking its annual capacity to 275,000 tons/annum.

The company decided to embark on the phase-II of capacity expansion in view of the growing construction activity around the country that is believed to sustain high levels of growth over the next decade.

The approved expansion, according to the company officials would further enhance the footprint of Amreli Steels across the country by supplying quality rebars for infrastructure development and fulfilling the needs of retail customers across Pakistan. More than 100 steel makers are operating in the country, while steel is also imported to meet the demand of construction sector.