NATIONAL STEEL POLICY MARCH, 2019 HEAD OFFICE M3, Mezzanine Floor Beaumont Plaza 10 Beaumont Road Civil Lines, Karachi Tel: (92 21) 3568 0045 Email: [email protected] Implementation of an integrated National Steel Policy will help Pakistan double its annual steel consumption to 18 million tons in the next 5 years paving the way for “self-sufficiency in steel. An integrated National Steel Policy shall lay the foundations for sustainable industrialization for NATIONAL decades to come. STEEL POLICY “ MARCH, 2019 05 NATIONAL STEEL POLICY 06 DISCLAIMER ‘The outcomes, interpretations and conclusions expressed do not necessarily reflect the views of the entire domestic steel industry. Although every effort has been made to cross-check and verify the authenticity of the data, the National Steel Advisory Council does not guarantee the topicality, accuracy, completeness or quality of any data, information or methodology provided herein and therefore shall not be held liable for the accuracy of same. All data and statistics used are correct as of November 2018, and may be subject to change. Furthermore, NSAC will not be liable in respect of any business losses, including without limitation loss of or damage to profits, income, revenue, use, production, anticipated savings, business, contracts, commercial opportunities or goodwill. Any conclusions, interpretations and analysis based on data from World Steel Association, International Iron and Steel Institute, Morgan Stanley, International Trade Centre and Pakistan Bureau of Statistics does not necessarily reflect the opinion of these authorities. For any feedback or queries regarding this report, please contact [email protected] ACKNOWLEDGEMENTS Team Leader: Syed Hasan Adnan Researchers: Rahat Azhar Zahir Navrozally 0507 NATIONAL STEEL POLICY 0805 TABLE OF CONTENTS 09 About the Council 55 Tariff and Duties 11 Executive Summary 57 Sales Tax Special Procedures, 2007 13 Overview of the World Steel Industry 59 Conclusion 21 Overview of the Domestic Steel Industry 61 Annexure I 30 Industry Analysis 62 Annexure Il 31 Pakistan Steel Mills (PSM) 63 Annexure Ill 33 Shipbreaking Industry 67 Annexure IV 34 Al - Tuwairqi 68 Annexure V 34 Long Products 36 Flat Products 39 Engineering Steels 40 Tubes & Pipes 43 Key Risks For The Domestic Steel Industry 44 National Steel Policy 46 Creation of Steel Demand 47 Raw Material Availability 48 Land 49 Logistics 49 Water 50 Power 51 Environmental Management 52 Technological Efficiency 52 Human Resource Development 53 Steel Research & Technology 53 Steel Development Committee (SDC) 54 Steel Standard Enforcement 55 Income Tax Incentives 09 NATIONAL STEEL POLICY 10 ABOUT THE COUNCIL FOUNDING MEMBERS OF THE COUNCIL The National Steel Advisory Council (NSAC) is a consortium of key players in the Pakistani steel industry. The Council serves as a not-for-profit, Steel Policy advocacy platform, registered under the Societies Registration Act, 1860. The body was constituted to ensure sustainable growth and development of the steel industry in Pakistan by advising the government on key policy matters. The Council is led by professionals and steel industry experts in order to have a collective voice for representation at various forums, including Government Authorities and Functionaries to seek an enabling and conducive environment for the growth of the steel industry. The NSAC is a non-partisan, steel industry advocacy group which does not advocate for any specific steel product sector and prides itself on equal representation of all members. The Council aims to highlight the valid concerns and problems faced by the local steel industry and seek their resolution with the concerned authorities at appropriate forums. The NSAC desires to work closely with the relevant government departments, ministries, regulators and institutions, as well as other stakeholders including professional bodies, to develop consensus on major issues which impact the conduct of steel business in and from Pakistan. The Council will be responsible for formulating policy as a roadmap for the domestic steel sector while promoting Responsible Steel. 11 NATIONAL STEEL POLICY 12 EXECUTIVE SUMMARY housing and public infrastructure, energy, engineering and automotive & consumer goods across the country. According to The World Bank, Pakistan is Pakistan is the world’s fifth most populous nation with an estimated demographic short of almost 10 million housing units, which will require substantial steel input footprint of over 210 million people. Our nation’s geostrategic location provides if we are to bridge this gap. Through successful policy intervention, if The convenient access on the west to the resource rich Middle East, Africa, and Central Government of Pakistan (GoP) is able to attract investment in the industry in the Asian States. Whereas, adjoining to the east, lie two major centers of economic power coming years, the country will benefit from estimated savings from import – China and India. The country is also blessed with an abundance of natural resources, substitution of US$ 2.2 billion/annum, investment of US$ 2.2 billion and an such as high value minerals and ores, fairly good quality coal and massive theoretical addition of 100,000+ direct & indirect jobs. offshore reserves of natural gas, for which exploration by international energy companies are underway. Pakistan’s human resource base has contributed immensely 03. The strategic nature of the steel industry is well established and towards the infrastructure development and socio-economic uplift needs of many self-sufficiency in steel is a longstanding objective of major industrial and countries in the region and this base is expanding - both in terms of numbers and skills military powers. Steel is a key ingredient for the defense industry and acquisition. It is therefore no surprise that the extensive US$ 62 billion undertaking, self-sufficiency would provide a strategic advantage as the global steel termed The China Pakistan Economic Corridor (CPEC), was envisioned to accelerate industry consolidates and eliminates excess capacity, making availability of growth via investments in energy, road & rail connectivity, industry and agriculture in finished steel products more challenging. order to leverage Pakistan’s tremendous potential as a gateway state and hub for economic activity. Such broad based investments are expected to lift the economic In light of the above, the objective of the NSP is to help develop a modern steel prospects of the country and bring about a structural transformation in the industry that is globally competitive in terms of cost, quality and global benchmarks and it is now more critical than ever economy. Pakistan is in effect ready to ‘takeoff’ of efficiency, sustainability and productivity. Key areas in need of policy direction that policies and reforms be designed to take full advantage of the opportunities that from the GoP to achieve the objectives are creation of sustainable demand, lie ahead. availability of raw material and land, energy and water requirements, logistics, criteria for technological efficiency, environmental management and quality To this end, a nationwide consortium of large scale steel manufacturers, control standards. It is hoped that the Policy will go a long way in establishing Pakistan representing various segments of the steel industry, have formulated a roadmap for as a major player of in steel production, processing and trading in the region. As part of the sustainable growth and development of the indigenous steel industry in the a philosophy of continuous improvement the Steel Policy will also be under continuous shape of the first ever integrated National Steel Policy (NSP). An integrated steel review keeping in view the dynamic nature of the steel industry. policy is the need of the hour for the country as: 01. The steel industry serves as a key enabler in the economy by providing the basic raw materials for public infrastructure development projects and key industries such as, housing and real estate development, energy, automotive, defense and various micro, small & medium enterprises (MSME) engaged in downstream engineering and fabrication business. 02. Steel consumption is currently one of the fastest growing areas in the economy, with consumption growing at a compounded annual growth rate (CAGR) of 19%, i.e. approximately a doubling of steel consumption every 5 years. Industry sources estimate that an additional 9 million tons of steel will be required in the next 3-5 years to support investments and expenditure on OVERVIEW OF THE WORLD STEEL INDUSTRY 15 NATIONAL STEEL POLICY 16 The iron and steel industry is the backbone of modern society and often termed the World crude steel production in 2017 was 1,689 million MT. The category-wise ‘mother of all industries’. The industry has significant forward and backward linkages breakup of the same is depicted in Figure 1 below: in terms of material flow, employment and income generation. Mining and scrap recycling industries provide the basic raw materials for steelmaking, whereas FIGURE 1 finished steel products are used in building and infrastructure development, WORLD STEEL PRODUCTION AND PRODUCT MIX energy, automotive, consumer goods, engineering applications and as raw Source: World Steel Association, 2017 materials for various downstream fabrication industries. From an engineering perspective, steel offers a range of unique properties with respect to its durability, Category Product Range Production Share (%)