Amreli Steels rolls out Dhabeji plant

KARACHI: Amreli Steels Limited’s (ASTL) new rolling mill at Dhabeji began its commercial operations on Monday, increasing the steel manufacturers rebar production capacity to 605,000 tons per annum from 180,000 tons per annum.

The company has completed its expansion plan with the Dhabeji plant, an analyst said. Updating on ASTL's Sindh Industrial Trading Estates (SITE) plant expansion, the analyst said that as per ASTL’s management, a debt to equity ratio of 80:20 would be suitable to cover the capacity expansion amounting to Rs2 billion which would take total capacity at SITE to 275,000 tons, an addition of 95,000 tons.

The melt shop at Dhabeji would be able to take its capacity to 600,000 from 400,000 by the first quarter of FY19. “The outlook for the fourth quarter is also positive with the company’s expected utilisation at Dhabeji to reach 30 percent in May 2018 and 35 percent in June 2018,” the analyst added.

It is worth noting that the successful commencement of the new mill enables ASTL to avail a five-year tax break on its rolling mill under section 65E, whereas BMR on its melt shop will get a tax credit under section 65B.

Speaking of price differential, Tahir Abbas, director research at Arif Habib, said currently rebar could be imported at Rs100,750/ton without incorporating anti-dumping duties and regulatory duty.

“Inclusive of duties and taxes, the prices arrive at an unfavourable Rs20,000 to Rs25,000 over and above the base price, and assuming trading margins of 8-10 percent, imported rebar appears uncompetitive,” he said.

With the recent budget unfolding, Amreli views that costs on account of higher sales tax on electricity consumption as well as one percent additional Customs duty of Rs2,500/ton would be passed on to consumers effective July 1, 2018.

Amreli Steels CFO said 3,000 tons were lost due to load shedding by K-Electric only at the SITE plant since it uses an 11KV line. “That said, operations are back on track now and fluctuations will completely stop within a week,” he added.

The company posted volumetric growth of 51,000 tons in the third quarter ended March 31, 2018 compared with 41,000 tons in the same period last year, while in nine months the production reached 125,000 tons.