Amreli cuts steel output on power woes

KARACHI: Amreli Steels, the country’s leading manufacturer of reinforcement bars, sheared its production capacity by 40 percent owing to power outages, a bourse filing said on Thursday.

“Due to severe load shedding by K-Electric of approximately eight hours, the re-rolling plant of the company which is situated at SITE Karachi is forced to reduce its production of rebars by 40 percent of its capacity,” the steelmaker said in notice to Pakistan Stock Exchange. “The management expects overall drop in production to continue until the load shedding does not end.”

K-Electric’s generation capacity has acutely been compromised due to non-availability of natural gas and the utility has no other option but to cut back power across its consumer base.

Currently, Amreli Steels has an annual steel rebar manufacturing capacity of 180,000 tons.

Sharukh Saleem, an investment analyst at First Capital Securities said the halt in production would impact the earnings of the company.

Previously, the steelmaker unveiled a plan to increase its steel-melting capacity given a loud steel demand in the country. The World Steel Association projected steel demand in Pakistan at more than 12 million tons by 2019 from 7.1 million tons in 2015.

“Much would now depend on the K-Electric as the company will be on the target if the utility restores electricity supplies normally,” Saleem added.

The company’s board, earlier this year, 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 two billion rupees. 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.

More than 100 steel makers are operating in the country, while steel is still imported to meet the demand of construction sector.