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February 16, 2021

Steel market shrinks 31 percent in FY2020

Business

February 16, 2021

KARACHI: Flat steel market sharply shrank 31 percent to 850,000 to 900,000 tons during the last fiscal year due to coronavirus-led lockdown and overall slowdown in economy, although the industry is expected to climb to 1.2 million tons in FY2021, an analyst said on Monday.

Shankar Talreja, deputy head of Research at Topline Securities said sudden rise in demand from construction and industrial expansion is likely to boost steel consumption.

The downstream industry where cold rolled coil (CRC) and hot-dipped galvanized coil (HDGC) consumed in automotive, pipes, drums, appliances, construction, telecom, and agriculture silos have been expected to portray robust growth over next two years, Talreja said.

“This is due to amnesty driven construction boom, low markup driven automotive sales, and rising income levels (rural and urban both) driven appliances and agriculture silos sales,” Talreja said.

Talreja said growth momentum is already visible during 1HFY21, where bike sales have grown 19 percent and appliances sales have increased 25 percent.

In FY2020, importers’ share in market dropped 38 percent 270,000 tons due to imposition of anti-dumping duties on flat steel products. In FY2016, 54 percent or 629,000 tons of flat steel was imported in Pakistan due to non-existence of anti-dumping duties, limited manufacturing capacity of local companies which was around 770,000 tons and strong rupee versus US dollar.

Local manufacturing capacity increased 187 percent to 2.2 million tons, while rupee depreciated 34 percent. Interestingly, one of the largest importers of flat steel installed own steel mill after realising that imports are becoming unviable.

“Our discussion with other flat steel dealers in Karachi has led to the conclusion that imported prime quality flat steel products are disappearing from market gradually,” said Talreja. “One of the important reasons is congestion at port, where priority berthing is being given to essential goods like sugar and wheat. Also huge currency depreciation of 34 percent in last few years has played its role in containing imports.”