Analysis of Steel Industry

Steel Industry in Pakistan
A Brief Analysis
Submitted by: CHOUDHRY JAWAD UR REHMAN
29/07/2010
A Brief Analysis of the Steel Industry in Pakistan

APPENDIX
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Introduction....................................................................
.....5 Steel....................................................................
.................................................6 Significance of Steel Industr
y in Economic Growth.........................................6 Steel Recycling..
................................................................................
..................7 Production Process..........................................
.....................8 Basic Steelmaking Process................................
.................................................9 Various Steel melting process
es.......................................................................10 o El
ectric arc Furnace..............................................................
...............10 o Bessemer method.............................................
.....................................10 o Open Hearth method....................
........................................................10 o Basic oxygen method
............................................................................10 R
aw materials....................................................................
...............................12 Types of Steel Mills..........................
.................................................................14 o Integrated
mill...........................................................................
...........14 o Mini mill.......................................................
.........................................14 The Consumption of Steel in everyday
commodities and its uses ......................................................
....................................15 Uses.....................................
..............................................................................16
Types of Steel and pertinent uses:.............................................
.......................16 o Long steel..........................................
....................................................16 o Flat carbon steel......
.............................................................................16
o Stainless steel...............................................................
.........................16 Industry Overview and Global Perspective............
................17 China & India emerges as Iron Fists..........................
....................................18 Global steel industry trends.............
.................................................................19 List of coun
tries by steel production.......................................................
.........20 List of steel producers by Companies: Worldsteel top producers 2009.
.........24 World Steel in Figures 2010.........................................
....................................25 May 2010 Crude Steel Production Figures..
...................................................25 Global Steel Forecasts: Wo
rldSteel Short Range Outlook.............................27 Historical Analysis
of Steel Industries in Pakistan.................28 Historical Analysis of the St
eel Mill Projects in Pakistan..............................29 Steel Mills in Pri
vate Sector.....................................................................
........30 Pakistan Steel Production, Consumption & Growth Potential............
..........36 Comparative Imports of Metal Group during July-March, 08-09 & 09-10
...37 Governments Role: Tariffs and taxes.....Error: Reference source not found9
Auxiliary Industries............................................................
..............................40 SWOT analysis..................................
................................................................41 3
A Brief Analysis of the Steel Industry in Pakistan o Strengths:.................

.............................................................................41
o Weaknesses:...................................................................
.......................41 o Opportunities:......................................
.................................................42 o Threats:..................
...............................................................................4
2 Pakistan Steel Mills Factor Conditions and Issues.............................
............43 o Infrastructure.................................................
......................................43 o Raw Materials........................
...............................................................43 o Labor:......
................................................................................
..............44 o Technology...................................................
.........................................44 o Utilities:........................
.........................................................................45 o En
vironmental Issue...............................................................
.............45 Recommendations.................................................
............................................46
Ship breaking & Steel Scrap industries.................................47 Future

Prospects................................................................50 Ext
racting domestic Iron-Ore Reserves..............................................
.............51 Al-Tuwairqi Steel Mills.........................................
...........................................52 Bibliography.....................E
rror: Reference source not found53
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INTRODUCTION:
A WORD ABOUT STEEL AND ITS SIGNIFICANCE IN ECONOMIC GROWTH
Steel
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Steel is an alloy of iron and carbon (containing carbon content between 0.2% and
2.1% depending on the grade). Apart from carbon, various other alloying element
s are used, such as manganese, chromium, vanadium, and tungsten. Carbon and othe
r elements act as a hardening agent, preventing dislocations in the iron atom cr
ystal lattice from sliding past one another. Varying the amount of alloying elem
ents and form of their presence in the steel (solute elements, precipitated phas
e) controls qualities such as the hardness, ductility, and tensile strength of t
he resulting steel.
Significance of Steel Industry in Economic Growth
The steel industry is often considered to be an indicator of economic progress,
because of the critical role played by steel in infrastructural and overall econ
omic development. The volume of steel consumed has been the barometer for measur
ing development and economic progress. Whether it is construction or industrial
goods, steel is the basic raw material. However with the advancement in technolo
gy, lighter metals and stronger alloys have been developed. Plastics and synthet
ics have replaced steel in many areas. Still, Steel today is one of the most commo
n materials in the world, with more than 1300 million tons produced annually. It
is a major component in buildings, infrastructure, tools, ships, automobiles, m
achines, appliances, and weapons.
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Steel Recycling
Steel is 100% recyclable, and because it maintains its properties through succes
sive product cycles without a loss of quality, it can be recycled an unlimited n
umber of times. It is easy to handle and separate from other materials in the re
cycling stream because of its natural magnetic properties. For example, a recent
world survey of steel can recycling found an average recycling rate of 63%, with
some countries reporting rates in excess of 85%. It is generally estimated that
the recycling rate of automotive steel is also very high, with the USA consisten
tly reporting grates over 90% for the last 10 years. Steel that is in use today
will be recovered, processed, and used again by future generations. Indeed steel
is the most recycled material in the world. IISI statistics show that 451.7 mmt
were collected and returned in 2004. This means that 42.7% of total world crude
steel produced in 2004 was made from recycled steel. Despite of the fact that S
teel is 100% recyclable, the actual percentage appears low because a large propo
rtion of steel products (such as buildings, bridges, and cars) have long life cy
cles. There is not enough recycled steel to meet societys increasing demand for s
teel. Demand for steel is 50% greater today than 10years ago, so current steel p
roduction requires still iron ore. Thus Demand for Steel is met through the comb
ined use of recycled steel as well as iron ore. Both primary and secondary raw m
aterials are necessary to further the industrys economic, environmental, and soci
al sustainability performance. Recycled steel is a very valuable secondary raw m
aterial. A dedicated infrastructure exists worldwide to ensure the most efficien
t use of this quality commodity, which is internationally traded and used today.
It is cheaper to recycle steel than to mine iron ore and manipulate it through
the production process to form new steel. Steel does not lose any of its inheren
t physical properties during the recycling process, and has drastically reduced
energy and material requirements compared with refinement from iron ore. There i
s often very little waste produced during construction, and any waste that is pr
oduced may be recycled.
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PRODUCTION PROCESS
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Basic Steelmaking Process:
It is produced in a two-stage process:
1. First, iron ore is reduced or smelted with coke and limestone in a blast furn
ace,
producing molten iron which is either cast into pig iron or carried to the next
stage as molten iron.
2. In the second stage, known as steelmaking, impurities such as sulfur, phospho
rus, and
excess carbon are removed and alloying elements such as manganese, nickel, chrom
ium and vanadium are added to produce the exact steel required. Steel mills turn
molten steel into blooms, ingots, slabs and sheet through casting, hot rolling
and cold rolling. With the invention of the Bessemer process in the mid-19th cen
tury, steel became an inexpensive mass-produced material. Further refinements in
the process, such as basic oxygen steelmaking, further lowered the cost of prod
uction while increasing the quality of the metal.
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Various Steel melting processes:
Electric high-frequency furnace and crucible processes Electric arc Furnace Bess
emer method Open Hearth method Basic oxygen method
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Many modernized Steel Mills now Integrated Route for Steel Making:
utilize
an
Raw materials
The ores used in making iron and steel are iron oxides, which are compounds of i
ron and oxygen. The major iron oxide ores are
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A Brief Analysis of the Steel Industry in Pakistan 1. 2. 3. 4.

Hematite, which is the most plentiful, Limonite, also called brown ore, Taconite
, and Magnetite, a black ore.
Iron making furnaces require at least a 50% iron content ore for efficient opera
tion, also, the cost of shipping iron ores from the mine to the smelter can be g
reatly reduced if the unwanted rock and other impurities can be removed prior to
shipment. This requires that the ores undergo several processes called "benefic
iation." These processes include crushing, screening, tumbling, floatation, and
magnetic separation. The refined ore is enriched to over 60% iron by these proce
sses and is often formed into pellets before shipping. The three raw materials u
sed in making pig iron (which is the raw material needed to make steel) are the
processed iron ore, coke (residue left after heating coal in the absence of air,
generally containing up to 90% carbon) and limestone (CaCO 3) or burnt lime (Ca
O), which are added to the blast furnace at intervals, making the process contin
uous. The limestone or burnt lime is used as a fluxing material that forms a sla
g on top of the liquid metal. This has an oxidizing effect on the liquid metal u
nderneath which helps to remove impurities. Approximately two tons of ore, one t
on of coke, and a half ton of limestone are required to produce one ton of iron.
There are several basic elements which can be found in all commercial steels:
Carbon is a very important element in steel since it allows the steel to be hard
ened by heat treatment. Only a small amount of carbon is needed to produce steel
: up to 0.25% for low carbon steel, 0.25-0.50% for medium carbon steel, and 0.50
-1.25% for high carbon steel. Steel can contain up to 2% carbon, but over that a
mount it is considered to be cast iron, in which the excess carbon forms graphit
e. The metal manganese is used in small amounts (0.03-1.0%) to remove unwanted o
xygen and to control sulfur. Sulfur is difficult to remove from steel and the fo
rm it takes in steel (iron sulfide, FeS) allows the steel to become brittle, or
hot-short, when forged or rolled at elevated temperatures. Sulfur content in com
mercial steels is usually kept below 0.05%. A small quantity of phosphorus (usua
lly below 0.04%) is present, which tends to dissolve in the iron, slightly incre
asing the strength and hardness. Phosphorus in larger quantities reduces the duc
tility or formability of steel and can cause the material to crack when cold wor
ked in a rolling mill, making it cold-short. Silicon is another element present
in steel, usually between 0.5-0.3percent. The silicon dissolves in the iron and
increases the strength and toughness of the steel without greatly reducing ducti
lity. The silicon also deoxidizes the molten steel through the formation of sili
con dioxide (SiO2), which makes for stronger, less porous castings.
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Another element that plays an important part in the processing of steel is oxyge
n. Some large steel mills have installed their own oxygen plants, which are loca
ted near basic oxygen furnaces. Oxygen injected into the mix or furnace "charge"
improves and speeds up steel production. Steel can be given many different and
useful properties by alloying the iron with other metals such as chromium, molyb
denum, nickel, aluminum, cobalt, tungsten, vanadium, and titanium, and with nonm
etals such as boron and silicon.
Types of Steel Mills:
INTEGRATED MILL:
Integrated mills are large facilities that are typically only economical to buil
d in 2,000,000 ton per year annual capacity and up. Final products made by an in
tegrated plant are usually large structural sections, heavy plate, strip, wire r
od, railway rails, and occasionally long products such as bars and pipe.
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An integrated steel mill has all the functions for primary steel production:

Iron Making (conversion of ore to liquid iron), Steelmaking (conversion of pig i
ron to liquid steel), Casting (solidification of the liquid steel), Roughing Rol
ling/Billet Rolling (reducing size of blocks) Product Rolling (finished shapes).
Because of the energy cost and structural stress associated with heating and coo
ling a blast furnace, typically these primary steelmaking vessels will operate o
n a continuous production campaign of several years duration. Even during period
s of low steel demand, it may not be feasible to let the blast furnace grow cold
. Due to the large employment of integrated plants, often governments will finan
cially assist an obsolescent facility rather than take the risk of having thousa
nds of workers thrown out of jobs.
MINI MILL:
A mini-mill is traditionally a secondary steel producer. Usually it obtains most
of its iron from scrap steel, recycled from used automobiles and equipment or b
yproducts of manufacturing. A typical mini-mill will have an electric arc furnac
e for scrap melting, a ladle furnace or vacuum furnace for precision control of
chemistry, a strip or billet continuous caster for converting molten steel to so
lid form, a reheat furnace and a rolling mill. Often a mini-mill will be constru
cted in an area with no other steel production, to take advantage of local resou
rces and lower-cost labor. Mini-mill plants may specialize, for example, making
coils of rod for wire-drawing use, or pipe, or in special sections for transport
ation and agriculture. Capacities of mini-mills vary; some plants may make as mu
ch as 3,000,000 tons per year, a typical size is in the range 200,000 to 400,000
tons per year, and some old or specialty plants may make as little as 50,000 to
ns per year of finished product. Since the electric arc furnace can be easily st
arted and stopped on a regular basis, mini-mills can follow the market demand fo
r their products easily, operating on 24 hour schedules when demand is high and
cutting back production when sales are lower.
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THE CONSUMPTION OF STEEL
IN EVERYDAY COMMODITIES AND ITS USES
Uses
Iron and steel are used widely in the construction of roads, railways, other inf
rastructure, applicances, and buildings.
3
A Brief Analysis of the Steel Industry in Pakistan 1. Most large modern structur
es, such as stadiums and skyscrapers, bridges, and
airports, are supported by a steel skeleton. Even those with a concrete structur
e will employ steel for reinforcing.
2. In addition to widespread use in major appliances and cars. Despite growth in
usage of aluminium, it is still the main material for car bodies.
3. Steel is used in a variety of other construction materials, such as bolts, na
ils, and
screws.
4. Other common applications include shipbuilding, pipeline transport, mining,
offshore construction, aerospace, white goods (e.g. washing machines), heavy equ
ipment such as bulldozers, office furniture, steel wool, tools, and armour in th
e form of personal vests or vehicle armour.
Types of Steel and pertinent uses:
Long steel
As reinforcing bars and mesh in reinforced concrete Railroad tracks Structural s
teel in modern buildings and bridges Wires
Flat carbon steel
Major appliances Magnetic cores The inside and outside body of automobiles, trai
ns, and ships.
Stainless steel
Cutlery Rulers Surgical equipment Wrist watches
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INDUSTRY OVERVIEW AND GLOBAL PERSPECTIVE
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China & India emerges as Iron Fists
The global steel industry has been going through major changes since 1970. China
has emerged as a major producer and consumer, as has India to a lesser extent.
The economic boom in China and India has caused a massive increase in the demand
for steel in recent years. Between 2000 and 2005, world steel demand increased
by 6%. Since 2000, several Indian and Chinese steel firms have risen to prominen
ce like Tata Steel (which bought Corus Group in 2007), Shanghai Baosteel Group C
orporation and Shagang Group. ArcelorMittal is however the world s largest steel
producer. In 2005, the British Geological Survey stated China was the top steel
producer with about one-third of the world share; Japan, Russia, and the US fol
lowed respectively. In 2008, steel started to be traded as a commodity in the Lo
ndon Metal Exchange. However due to the recent economic recession, the steel ind
ustry faced a sharp downturn that led to many cut-backs at the end of 2008.
Global steel industry trends
World Steel Production in the 20th Century
Over the course of the 20th century, production of crude steel has risen at an a
stounding rate. Global steel production grew enormously in the 20th century from
a mere 28 million tonnes at the beginning to 781 million tonnes at the end. Tod
ay it is fast approaching a production level of 800 million tons per year. In th
e mechanized world of today, it is difficult to imagine a world without steel. D
uring the 20th century, the consumption of steel increased at an average annual
rate of 3.3%. In 1900, the USA was producing 37% of the worlds steel. With post w
ar industrial development in Asia that region now (at the turn of the century) a
ccounts for almost 40%, with Europe (including the former Soviet Union) producin
g 36% and North America 14.5%.
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Steel consumption increases when economies are growing, as governments invest in
infrastructure and transport, and build new factories and houses. Economic rece
ssion meets with a dip in steel production as such investments falter. If you we
re to overlay the above graph with a time sheet showing major historical events,
the peaks and dips become meaningful. Note for example the peaks corresponding
to the years of the two World Wars, followed each time by a dip, and soon after
by strong climbs as the major economies recovered from the war and entered new p
eriods of prosperity and growth, most notably in the 1950s and 1960s. However, s
teel consumption in the developed countries has reached a high stable level and
growth has tapered off. After being in the focus in the developed world for more
than a century, attention has now shifted to the developing regions. In the Wes
t, steel is referred to as a sunset industry. In the developing countries, the s
un is still rising, for most it is only a dawn. Towards the end of the last cent
ury, growth of steel production was in the developing countries such as China, B
razil and India, as well as newly developed South Korea. Steel production and co
nsumption grew steadily in China in the initial years but later it picked up mom
entum and the closing years of the century saw it racing ahead of the rest of th
e world. China produced 220.1 million tonnes in 2003, 272.2 million tonnes in 20
04 and 349.36
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million tonnes in 2005. That is much above the production in 2005 of Japan at 11
2.47 million tonnes, the USA at 93.90 million tonnes and Russia at 66.15 million
tonnes.
World Crude Steel Production 1950 To 2009
Steel production:
1999
Steel production:
2009
Geographical distribution
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Steel Use:
1999
Steel Use:
2009
List of countries by steel production
In 2007, total world crude steel production was 1,351.3 million metric tonnes (m
mt). The biggest steel producing country is currently China, which accounted for
36.6% of world steel production in 2007. In 2008, in the majority of steel prod
ucing countries, output fell as the global recession began.
Exports
Top steel exporter in 2006[2] Rank Country Volume 1 China 51.7 2 3 4 5 6 7 Japan
Russia Ukraine Germany Belgium 34.6 31.5 30.6 29.2 24.6 European Union 32.4
Top steel net e Rank Cou 1 2 3 4 5 6 7 China
Japan Ukrain Brazil
3
Russia
Belgiu
Germa

Rank Country/Region 2007 World 1,351.3 1 People s Republic of China 494.9 Europe
an Union 209.7 Crude steel production (million tonness): 2 Japan 120.2 3 United
States 98.1 4 Russia 72.4 5 India 53.1 6 South Korea 51.5 7 Germany 48.6 8 Ukrai
ne 42.8 9 Brazil 33.8 10 Italy 31.6 11 Turkey 25.8 12 Taiwan 20.9 13 France 19.3
14 Spain 19.0 15 Mexico 17.6 16 Canada 15.6 17 United Kingdom 14.3
2008 1326.5 500.5 198.0 118.7 91.4 68.5 55.2 53.6 45.8 37.1 33.7 30.6 26.8 19.9
17.9 18.6 17.2 14.8 3 13.5

List of steel producers by Companies: Worldsteel top producers 2009
The World Steel (World Steel Association) ranked the following top steel produce
rs in 2009, by mmt (million metric tons of crude steel output). The Top 49 are l
isted like below:
Rank Company 1 2 3 4 5 6 7 8 9 10 11 12 13 ArcelorMittal Baosteel POSCO Nippon S
teel (1) JFE Tata Steel (3) Ansteel Severstal Evraz U.S. Steel Shougang (4) Gerd
au
mmt Rank Company 77.5 26 31.3 27 31.1 28 26.5 29 25.8 30 20.5 32 20.1 33 16.7 34
15.3 35 15.2 36 15.1 37 14.2 38 Hyundai CELSA Metinvest Techint Erdemir Kobe Us
iminas JSW Essar Salzgitter (5) Hadeed
mmt 8.4 7.8 7.4 6.9 6.5 5.9 5.6 5.5 5.5 4.9 4.8 3
Jiangsu Shagang (2) 20.5 31
Metalloinvest 6.5
voestalpine (7) 5.5
A Brief Analysis of the Steel Industry in Pakistan 14 15 16 17 18 19 20 21 22 23

24 25 Nucor Wuhan SAIL Handan Riva Sumitomo tdyssenKrupp (5) Novolipetsk (6) IM
IDRO Magnitogorsk China Steel Laiwu 14.0 39 13.7 40 13.5 41 12.0 42 11.3 43 11.0
44 11.0 45 10.9 46 10.6 47 9.6 8.9 8.9 48 49 BlueScope CSN Ezz SSAB Sidor Dufer
co Nisshin Vizag CMC AHMSA Dongkuk 4.6 4.4 3.9 3.6 3.1 3.1 3.1 3.0 3.0 3.0 3.0
World Steel in Figures 2010
In 2009 the five major steel producing countries were:
1. China 567.8 mmt 2. Japan 87.5 mmt 3. India 62.8 mmt 4. Russia 60.0 mmt 5. Uni
ted States 58.2 mmt
Total world production was 1,226.5 mmt in 2009, down from 1,329.0 mmt in 2008. T
he largest five steel producing worldsteel member companies in 2009 were:
1. ArcelorMittal 77.5 mmt 2. Baosteel 31.3 mmt 3. POSCO 31.1 mmt 4. Nippon Steel
26.5 mmt 5. JFE 25.8 mmt
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May 2010 Crude Steel Production Figures
World crude steel production for the 66 countries reporting to the World Steel A
ssociation (WorldSteel) was 124 million metric tons (mmt) in May. This is 29.1%
higher than May 2009. Chinas crude steel production for 2010 was 56.1 mmt, an inc
rease of 20.7% compared to May 2009. Elsewhere in Asia, Japan produced 9.7 mmt o
f crude steel in May 2010, up 50.2% compared to the same month last year. South
Koreas crude steel production for May 2010 was 5.2 mmt, 28% up compared to the sa
me month last year. In the EU, Germanys crude steel production for May 2010 was 4
.1 mmt, an increase of 87.7% on May 2009. Italy produced 2.5 mmt, 42% higher tha
n the same month in 2009. Spain produced 1.6 mmt of crude steel in May 2010, an
increase of 24.9% compared to May 2009. Turkey produced 2.5 mmt of crude steel i
n May 2010, an 18.8% increase over the same month in 2009. The US produced 7.2 m
mt of crude steel in May 2010, an increase of 73.8% compared to May 2009. Brazil
ian crude steel production was 2.9 mmt, 50.8% higher than May 2009.
World crude steel production in May 2010 was 9.8% higher in comparison with May
2007, before the impact of the global economic crisis was felt. However, while C
hina, South Korea
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and Turkey showed increased crude steel production in May 2010 compared to the s
ame month 2007, the US, Italy, Spain and Japan are not yet back to pre-crisis pr
oduction levels. The EU is -18%, North America -14% and Latin America -9.8% down
on the five months to May total in 2007. The world crude steel capacity utiliza
tion ratio of the 66 countries in May 2010 slightly declined to 82% from 83.4% i
n April 2010. Compared to May 2009, the utilization ratio in May 2010 increased
by 15 percentage points.
Global Steel Forecasts: WorldSteel Short Range Outlook
The emerging economies, who in total maintained growth through the crisis, are e
xpected to continue to grow, driving world steel demand in the future. Recovery
in the major developed economies is slower and the projected steel demand for th
em in 2011 is well below the 2007 level.
1: Apparent steel use (ASU)
Short range outlook for apparent steel use, finished steel (2009-2011)
ASU, mmt Regions European Union (27) 2009 (e) 2010 (f) 2011 (f) 118.4 134.6 145.
2
Growth Rates, % 2009 (e) 2010 (f) 2011 (f) -35.2% 13.7% 7.9% 3
A Brief Analysis of the Steel Industry in Pakistan Other Europe C.I.S. N.A.F.T.A
. Central & South America Africa Middle East Asia & Oceania World China BRIC MEN
A World excl. China World excl. BRIC 23.9 35.8 80.9 33.6 26.4 40.7 761.5 1,121.2
542.4 640.9 57.5 578.8 480.3 27.2 39.8 99.9 40.4 28.7 44.7 825.7 1,240.9 578.7
692.0 62.9 662.2 548.9 30.4 43.0 107.1 43.1 31.3 48.4 857.7 1,306.2 594.9 720.7
68.2 711.3 585.6 -12.5% 13.5% -28.2% 11.0% -37.4% 23.5% -24.1% 20.0% 9.6% -8.0%
8.7% -6.7% 24.8% 17.5% 0.8% 8.6% 10.0% 8.4% 10.7% 6.7% 8.0% 9.5% 11.9% 8.0% 7.2%
6.7% 9.3% 8.2% 3.9% 5.3% 2.8% 4.1% 8.4% 7.4% 6.7%
-24.5% 14.4% -26.8% 14.3%
HISTORICAL ANALYSIS OF STEEL INDUSTRIES IN PAKISTAN
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Historical Analysis of the Steel Mill Projects in Pakistan
Most Pakistanis do not realize that a Steel Mill is actually more essential than
a nuclear plant, or a missile. A steel mill is the backbone of the infrastructu
re of any country. Whether it is roads, bridges, or sugar mills, everything come
s from a steel mill. After independence in 1947, it did not take long for Pakist
an to come to the realization that progressive industrial and economical develop
ment would be impossible without the possession of a self reliant iron and steel
making plant. The dependence on imports would cause serious setbacks to the cou
ntry along with an extortionately high import bill which would be impossible to
support. Unfortunately Pakistan could not get a steel mill from 1947-1973. Most
powers would not sell the technology that could undermine the industrial prowess
as well as the export capability of Western enterprise. The initial idea for a
domestic iron and steel mill was put forward in the first five year plan of Paki
stan (1955 - 1960). Debates over the manufacturing process, supply sources of th
e requisite machinery and raw materials, plant site, domestic ore versus importe
d ore, ownership pattern, product mix and above all foreign financing credit kep
t the project on hold for a considerable time.
The Kalabagh steel mill project:
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In 1956, M/S Krupp of Germany offered to set up a steel mill based on Kalabagh i
ron ore. Most of the other required minerals, including coal, were available in
a radius of only 11 miles from the proposed site. Unfortunately, the concerned m
inister from a steel-importing family managed to sabotage this project. Mr. Ghul
am Farooq, the then chairman of the Pakistan Industrial Development Corporation,
resigned in protest. Interestingly, this Kalabagh iron ore was of such high qua
lity that in June 1966, M/S Salzgitter of Germany procured 15,000 tonnes of the
ore, and produced 5,000 tonnes of quality steel which was bought by the world-fa
mous automobile company, Volkswagon. Consequently, M/S Salzgitter offered to set
up Kalabagh steel mill based on Kalabagh iron ore, and imported coal. This proj
ect was estimated to cost only Rs1.5 billion. It adds to the credibility of the
project that certain European banks offered to finance the project. Once again,
the offer was rejected. In April 1968, President Ayub Khan accepted the Russian
offer for Kalabagh steel mill project, and his successor President Yahya Khan in
ked the project agreement with Russia. However, it was later learnt that Russia
did not possess the technology to produce steel from the Kalabagh iron ore. Comm
on-sense would indicate that German offers for the Kalabagh iron ore should have
been revived. Instead, the site of the steel mill was shifted to Karachi. Not o
nly was its machinery comparatively inferior, but it was based on ore and coal t
hat had to be imported.
The Nokkundi iron ore project:
In 1972, experts from China discovered a substantial quantity of high quality ir
on ore in Nokkundi, Balochistan. Steel experts from America and Japan confirmed
its suitability for steel production. They, therefore, recommended that a mini s
teel mill be set up in Balochistan. Even till 1999, offers from China and Iran w
ere submitted to our government for this steel mill in Balochistan. Like the Kal
abagh iron ore project, this too was never to see the light of day.
The Pakistan Steel Mill (PSM):
After the engineered demise of the Kalabagh steel mill and the Nokkundi iron ore
projects, Pakistan Steel concluded an agreement with V/O Tiajproexport of the t
hen USSR In January, 1969 for the preparation of a feasibility report into the e
stablishment of a steel mill at Karachi. Subsequently in January, 1971 Pakistan
and the USSR signed an agreement under which the latter agreed to provide techno
-financial assistance for the construction of a coastal based integrated steel m
ill at Karachi.
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The foundation stone for this gigantic project was laid on the 30th of December,
1973 with an estimated cost of Rs14 Billion. It was completed in 1985, but only
after the costs had soared by an additional Rs10 billion. Pakistan Steel is Pak
istan s largest industrial complex. Its unloading and conveyor system at Port Qas
im is the third largest in the world and its industrial water reservoir with a c
apacity of 110 million gallons per day is the largest in Asia. A 2.5 km long sea
water channel connects the sea water circulation system to the plant site with
a consumption of 216 million gallons of sea water per day. PSMs comprises of Compo
nent Units numbering over twenty and each is a big enough factory in its own righ
t. Pakistan Steel is strategically located 40km south east of Karachi in close v
icinity to port Muhammed Bin Qasim. Pakistan Steel is a costal site which lies o
n the National Highway and is linked to the railway network. Spread overran area
of 18,600 acres (29 square miles) with 10,390 acres for the main plant, 8070 ac
res for the township and 200 acres for the water reservoir. Pakistan Steel speci
alize in the production of flat steel products including, billets, slabs, hot ro
lled coils, cold rolled coils, galvanized sheets/coils/formed sections and corru
gated sheets. Moreover, while the installed capacity has been 1.1 million tonnes
per year, the average utilization hovers around only 80 per cent of this target
.
Importance of Pakistan Steel Mill
Despite of all the scandals, corruption-cases and inefficiencies, PSM holds a st
rategic position in the economy of Pakistan. A steel mill is not a normal run of
the mill factory. It has long term implications on the defense industry. In the
case of defense projects like the JF-17 Thunder or the Al Khalid Tanks or the S
haheen missile, steel produced in Pakistan through PSM proved to be quite essent
ial. The Pakistan steel mill was seminal in creating the gas centrifuges, the su
gar mills, the Shaheen and Hataf missiles, the Al-Zarar and Al-Khalid tanks and
the buildings of Pakistan.
3

Privatization of Pakistan Steel Mills:
In May 2006, the government of General Musharraf privatized Pakistan Steel Mills
. The consortium involving Saudi Arabia-based Al Tuwairqi Group of Companies sub
mitted a winning bid of $362 million for a 75 per cent stake in Pakistan Steel M
ills Corporation (PSMC) at an open auction held in Islamabad. the consortium of
Saudi Arabia-based Al Tuwairqi Group of Companies, Russia s Magnitogorsk Iron &
Steel Works and local firm Arif Habib Securities paid a total Rs21.6 billion ($3
62 million), or Rs16.8 per share, to take control of Pakistan s largest steel ma
nufacturing plant.
Suo moto notice
In response to wide spread public outcry and call for action the Chief Justice o
f Pakistan took a suo moto action against the privatization citing irregularitie
s in the process. The Supreme Court on August 8, 2006 held that the entire disin
vestment process of the Pakistan Steel Mills reflected haste, ignoring profitabi
lity aspect and assets of the mills by the financial adviser before its evaluati
on and by the Privatization Commission (PC) and the Cabinet Committee on Privati
zation (CCOP) On June 23, a nine-member bench of the Supreme Court had annulled
the sale of the countrys largest industrial unit to a three-party consortium and
had directed the government to refer the matter to the Council of Common Interes
ts within six weeks. It had declared the $362 million transaction with the Russi
an-Saudi-Pakistan investors as null and void. The verdict said that keeping in v
iew the annual net profit of the mill, its shares value should have been ascertai
ned by offering 10 per cent equity of the mills on the stock exchange. A constitu
tional court would be failing in its duty if it does not interfere to rectify th
e wrong, more so when valuable assets of the nation are at stake, the judgment sa
id.
Pakistan Steel: bail-out package approved by Gilani
The Ministry of Industries had sought Rs 25 billion for long term while an amoun
t of Rs 10.640 billion immediately to salvage the mill. Allowing PSM closure wou
ld create a devastating affect on the already suffering economy of Pakistan and
render 17,000 employees jobless thus creating an enormous social issue.
During the last three years PSM was totally dependent on imported raw material s
ince there was disruption in supply of local raw material because of poor law an
d order situation. The local raw material otherwise also partially supplemented
the requirements of the mill. The global recession and fluctuation of prices at
3

international level are beyond the control of Pakistan Steel Mills, which were m
ainly responsible for the losses. In April 2008, PSM signed contracts for raw ma
terials at much higher rates, resulting in costlier finished products. With othe
r steel producing countries lowering product prices, Pakistan Steel Mills witnes
sed a drastic slump in sales and recorded a loss of $156 million for the period
July 2008-March 2009.
Steel Mills in Private Sector
About 15 Arc furnaces of capacity 5 mt were installed in the private sector in e
arly 70 s and they have started their production to support Pakistan Steel Mills
in producing steel in the country.
3

Currently there are more than 140 steel melting induction furnaces installed in
different areas of Pakistan which are producing good quality steel to meet Pakis
tan s steel requirements. As Arc furnaces are expensive and take longer producti
on time than Induction furnaces, so most of the private sector is shifted to Ind
uction furnaces. Private factories are now producing steel with latest technolog
y induction furnaces and they are trying their best to compete the international
market. Pakistan Steel mills is producing about 1 million ton per year steel wh
ere private sector is producing 30 million ( including billet, rebars, channel a
nd angle etc) The other requirements are fulfilled with ship breaking and other
steel products.
Al Tuwairqi Steel Mills:
Keeping in mind the recent the recent development, Saudi Arabia has also investe
d in the Pakistan Steel industry through renowned company "Al-Tuwairqi Steel Mil
ls". TSML is the country s first private-sector integrated environment-friendly
steel manufacturing project of Al Tuwairqi Holding, Kingdom of Saudi Arabia. Its
complex spreads over an area of 220 acres at Bin Qasim, Karachi, and employs th
e world s most advanced DRI (Direct Reduction of Iron) technology based on the M
IDREX process. After completion Al-Tuwairqi would be operational with an install
ed capacity of 1 million mt billet caster per year. Al-Tuwairqi will utilize the
available Rizvi deposits of iron ore in Pakistan for production.
Mr
Zaigham
Adil
Director Projects Tuwairqi Steel Mills Limited
If everything goes according to plans, Tuwairqi Steel Mills Limited (TSML) aims
to start production by the beginning of the fourth quarter, 2010. The constructi
on of the plant took about three years and there was a nine-month delay due to f
inalizing procedures, but now construction is 95 percent complete
1st Phase:
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In its first phase, TSML s Karachi-based plant is targeted to have a production
capacity of 1.28 million tonnes per year of direct reduced iron (DRI), which is
used to make steel. Eventually achieving full capacity within a year s time and
grow to Pakistan s largest steel producer. The first phase of TSML cost $275 mil
lion and was fully financed by Tuwairqi Holding, including 65 percent through de
bt. We should ask ourselves, what is DRI? DRI is one of the most preferred raw m
aterials for quality steel making, globally. There is a consistent growth in the
production of DRI over the years, owing to environment-friendly production proc
esses and consistent quality of the product. Foundries and melt shops in Pakista
n have not yet fully realized the benefit of using DRI. Actually, DRI contains a
round 94 percent iron with very little impurities, which are removable. As compa
red with the conventional steel making processes, using DRI gives a very good co
ntrol over composition of various types of steels, and seemingly DRI is steel s
most versatile form. We have recently signed agreements with some Indian and Mal
aysian companies for selling our DRI to them.
2nd Phase:
In the second phase of the project, forward integration, the management plans to
set up an electric arc furnace, for the production of 1.28 MTPY billets, an inv
estment of USD 380 million and German technology. The firm is also looking at op
portunities for iron ore exploration in Pakistan s Baluchistan and Punjab provin
ces However to meet its requirements in the coming period, it will be procuring
buying the ore from Bahrain. TSML will be playing a pivotal role in bridging the
demand-supply gap. It is important to note that Pakistan s annual demand for st
eel is around 8.4 million tonnes, while production is 4.9 million tonnes per yea
r. Additionally TSML possess plans to export 50 percent of our production to Ind
ia and the Middle East. Pakistans economy and industry in general is being hinder
ed by power shortages, which are proving to be life-threatening for the very exi
stence of the economy. The nation has production capacity of about 16,500 MW but
faces a shortfall of between 4,000-5,000 MW. Tuwairqi Steel Mills plans to over
come this problem by building on-factory gas turbines, which can generate 38 MW,
thus alleviating the power shortage problem for TSML. Moreover TSML will not on
ly be a source of transfer of the latest technology of quality steel making, it
will also be helpful in giving impetus to the industrial progress in Pakistan. I
t will open up new avenues of investment in similar plants besides giving a boos
t to the downstream industries of the country. In the context of human resource
development, TSML will create around 1,000 direct and about 3,500 indirect job o
pportunities. Pakistan is among those countries that rely mostly on imports, whe
n it comes to heavy mechanical structures and engineering goods. By producing hi
gh-quality steel within Pakistan, we can manufacture such equipment locally by v
alue addition, with the help of downstream industries.
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Consortium plans steel mill at Kalabagh:
A consortium of four steel mills will establish an integrated steel mill at Kala
bagh, The planned steel mill would have annual capacity of producing one million
tonnes of steel using indigenous iron ore excavated from Kalabagh and Chiniot.
The consortium comprising four companies include Mughal Steel, Star Cotton Corpo
ration, Pak Steel and Ittehad Steel Mills. They have already incorporated a comp
any under the name of Indus Consortium Mining & Steel Industry (Pvt) Ltd with Secu
rities and Exchange Commission of Pakistan (SECP), sources in the ministry of In
dustry & Production (MOIP) told this correspondent.
3

Pakistan Steel Production, Consumption & Growth Potential
Pakistan has also been experiencing growing demand for steel, but its demand for
steel is overshadowed by China, India and Japan, for its annual consumption onl
y reaches 5m tonnes. An increasing growth in the country s automobile and constr
uction industries, as well as, large scale hydra-power projects dam construction
, has contributed to the increase demand in steel. According to statistics for 2
009, the world crude steel production stood at 1.2 billion tonnes, wherein Pakis
tan s share is merely about 0.24 percent. This speaks volumes of a huge potentia
l of investment and growth opportunity in the steel sector of Pakistan. It is im
portant to note that Pakistan s annual demand for steel is around 8.4 million to
nnes, while production is 4.9 million tonnes per year. The current scenario of P
akistani steel sector indicates a huge growth potential in this industry. The pe
r capita-consumption of steel in Pakistan is only 38 kg vis a vis a global avera
ge of 175 kg. Even if we consider the very modest increase in per capita steel c
onsumption to 80 Kg in next 10 years, the steel requirement works out to be 16 m
illion tons per annum for a population of around 200 million by year 2020. It is
important to note that Pakistan s annual demand for steel is around 8.4 million
tonnes, while production is 4.9 million tonnes per year. Many notable foreign i
nvestors and analysts insist that Pakistan is evidently a multi-billion dollar m
arket, an for this goal to achieve it needs a number of quality steel manufactur
ing projects so that it does not only become self-reliant in steel sector but al
so can enhance its share in global engineering arena. As a step towards the abov
e mentioned vision, Tuwairqi Steel Mills has established a Technology Centre and
Applied Research Centre for human resource development.
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Comparative Imports of Metal Group during July-March, 2008-09 and 2009-10
Sr. # Item Metal Group G. % Share 41 42 43 44 45 Gold (7.2) 18.9 (7.1) 117.1 326
.8 872.3 102.3 368.8 519.6 -25.6 -9.5 16.5 -1.2 2008-09 (July- 2009-10 (July- Pe
rcentage March) March)* Change 1883.2 1787.3 -5.1
Iron and steel 439.5 scrap Iron and steel 983.6
Aluminum 87.8 wrought & worked All others 373.4 metals & artifacts
3

3

Governments Role: Tariffs and taxes
The Ministry of Industry and Production recently proposed imposing a 10 percent15 percent import duty on steel products in order to protect domestic production
and sales. The import duty will be imposed on three categories: galvanized prod
ucts, cold- and hot-rolled coils. Pakistan Steel Mills, the country s largest st
eel producer, has been severely affected by the decline in steel prices worldwid
e.
In view of the present scenario in the steel sector, Pakistan s government has f
ormulated a National Steel Policy. The policy aims at bridging the demand-supply
deficit in the country by increasing domestic steel production capacity to 15 m
illion tons per year by 2020. This augmentation in production capacity can suffi
ciently be sufficed through ample domestic iron-ore deposits. Pakistan has prove
n iron ore reserves of about 1.42 billion tons. The country s primary deposits a
re located in North West Frontier Province, Baluchistan and Punjab. These region
s account for 947 million tons of iron ore reserves and are estimated to contain
20 percent-60 percent of iron content. Kalabagh, which has about 450 million to
ns of reserves, contains 30 percent-35 percent of iron. The new steel policy als
o proposes the development of steel mills in these regions. This would not only
increase production but also bring down manufacturing costs. The government has
planned duty cuts, assistance in land acquisition, and development of infrastruc
ture to attract foreign and private sector investors to set up manufacturing fac
ilities. Pakistan s first private sector steel plant is being developed in Bin Q
asim by Al-Tuwairqi Holding (Dammam, Saudi Arabia) at an investment of $300 mill
ion.
Manzoor Ahmed Wattoo, Pakistan s Minister of Industry and Production, recently s

aid the government is proposing to fix the prices of local steel products manufa
ctured by state-controlled Pakistan Steel Mills Corporation Limited (Karachi, Pa
kistan) to be on par with international market standards. The proposal aims to n
ot only integrate the steel industry in the country but also evolving a transpar
ent, open system of operations.
3

Presently, steel companies in Pakistan do not conform to international steel pri
ces but carry out price fixations independently. The Ministry also stressed the
need for a committee to ensure steady supply of raw materials for the industry.
The rates and taxes on steel products in Pakistan have not been altered despite
the slump in steel prices globally.
Auxiliary Industries
The steel industry is considered the mother industry of all industries, particul
arly the engineering industry.
Cold Rolled Sheets Enameled ware Bicycle Steel fabrication Drums Barrels Jerry-c
ans Steel furniture Machinery Vehicle and bus bodies Steel containersteel contai
ner
Galvanized Sheets Containers Ducting equipment Water heaters Steel shuttering De
sert coolers Boxes & Utensils Air-conditioners trunks Fresh water tanks Paneling
appliances Construction and roofing
Cold and hot-formed Steel Fabrications Furniture Vehicle and Bus Bodies Building
Construction Steel Doors and Windows Miscellaneous Machinery and Equipment
3

SWOT analysis
Strengths:
Cheap labor Low cost Rebuilding of infrastructure in Afghanistan
Weaknesses:
The majority of Pakistani Steel is produced through small steel mills, which uti
lize outdated hearth process, and Pakistan has yet to modernize its steelmaking
processes considerably. Labor productivity in Pakistan is very low. Steel produc
tion in Pakistan is hampered through power shortages, and this hindrance is less
likely to be resolved in the near future.
3

In addition to being scarce, energy is also expensive thus contributing towards
incompetence of Steel Mills. Poor infrastructure. Lack of R&D investment Depende
nce on imports for steel manufacturing equipments and technology. Raw materials
are also being imported from Australia and Canada. Greater distance and high fre
ight charges- increased cost of production. Price of domestic steel is dependant
on international markets. Local demand is unsatisfactory and needs to be encour
aged, especially Construction and Housing sector. Substandard raw materials are
being smuggled across Afghanistan Production process is not environment friendly
- not implementing innovative process technologies that reduce emissions and was
tages, sludge and dust. Only 60% of the capacity is being utilized Lack of manag
ement skills and information systems in the industry Machinery is old and needs
repairs and upgrades. In the world steel industries there is a paradigm shift fr
om technology oriented to value enhancement. Inconsistent policies resulting in
poor investor confidence as portrayed by the failure of privatization
Opportunities:
Govt. reduced GST, additionally EDB is proposing a 0% sales tax. The large iron
ore and coal reserve of Pakistan provide good opportunity in the steel sector fo
r enterprising investors. The Engineering and Development Board (EDB) of the min
istry of industries and production has evolved the long term National Steel Polic
y with a view to cover the widening demand and supply gap by achieving a producti
on target of 15 million tonness of steel by 2020. Pakistan to shift its focus fr
om textile & agriculture to heavy industries. ( heavy industries 60 % of world t
rade) vision 2030. Setting up of high tech plants ( Tuwairqi Steel Mill ). Trans
fer of technology and enhancing quality of manpower through setting up six engin
eering universities.
3

Kalabagh and Chiniot have known deposits of iron ore that have not yet been exca
vated and utilized by the local steel industry, as importing iron ore, iron and
steel scrap was cheaper than mining local ore a capital-intensive venture. With
global steel and iron ore prices skyrocketing there is hope that both Internatio
nal and domestic steel makers have finally decided to excavate and exploit local
reserves.
Threats:

Slow growth in infrastructure development. Possibilities of export growth from C
hina. Pak Steel Mill --- historically a loss making enterprise. Recent trends --imports from India. Interest rate scenario will have a bearing on the
construction sector. Increased vulnerability to international market trends. Lac
k of professionalism (implementation of technology).
Pakistan Steel Mills Factor Conditions and Issues
1)
Infrastructure:
The machinery of Pakistan Steel has become old and it needs renovation and impro
vement. Moreover, it the machinery is being run badly in the past years.
3

Only 60% of the capacity is being utilized and no steps are being taken for the
capacity expansion.
2) Raw Material:
The basic raw material for the steel melting industries is the steel scrap. The
scrap is classified into different categories, by each factory, depending on the
quality and use. Scrap of different categories is generally stored in separate
piles. Following types of scrap are in common use, in varying proportions, in di
fferent factories. o Pressed Oil & Paint Tins o Pressed Used Beverage Cans (UBC)
o War Scrap o Ship Breakage Scrap o Parts of Vehicles and Machines Main raw mat
erials of steel industry include steel scrap, fluxes, Ferro alloys and coke, whe
reas steel scrap is used in abundance in comparison with other constituents. Abo
ut 1,000,000 ton steel scrap in total, inclusive of 400,000 ton scrap imported f
rom countries like Middle East, South Africa, Australia, and Europe, is consumed
annually in Pakistan for melting. MS billets, steel ingots and other steel scra
p form the main raw material for steel re-rolling mills, obtained from Pakistan
Steel Mill Karachi and other steel smelters all over the Pakistan. Raw materials
are being imported from Canada and Australia, which are far away, involving hug
e freight charges. Other major countries are South Africa, South America and Eur
ope. PSMC, imports 100% of it iron ore and coal requirements, whereas fluxes are
procured locally. Contracts with India and Iran have been signed for import of
iron ore, which seems convenient and feasible. Major sources of supply of coking
coal are not available, which is now being imported from Australia. The price o
f domestic steel is dependent on international factors since 75 per cent of our
steel demand is met through imports. Smuggling of sub-standards raw material

3) Labor:
About 90 per cent employees are over 40 years old and some of them are not maint
aining good health.
3

There has been no fresh induction in last decade creating a vacuum. However, ind
uction in the three tiers started in 2005-06. This includes enrolment as apprent
ices, Junior Officers based on their diploma and other technical performance, an
d finally induction as assistant managers in various professional disciplines th
rough an open and transparent system of selection. Metallurgical Training Center
(MTC) has been undertaken with selection on merit and effective arrangements ha
ve been made for on-job-training (OJT). Contract with Ukraine, Japan, China, Rus
sia and Iran have been signed for mutual co-operation in training of our enginee
rs. Labor agitation over privatization

4) Technology
Innovative process technologies that reduce emissions and wastes (sludges, dusts
, CO2) are not implemented. Advanced recycling solutions that convert wastes int
o valuable products are also not available There is a paradigm shift in the worl
d steel industries where companies are becoming less and less technology-oriente
d and more and more valueenhancement oriented. This is reflected by the efforts of
producers to improve the quality and value of their products as exemplified by
the development of new and ultra-high-strength steels .The creation of higherval
ue steel grades through innovative product development is an important step for
maintaining and expanding existing markets, as well as for securing niche market
s. Pakistan, however, has been unable to inculcate this shift in its local indus
try. There is a lack of management skills and information systems in the industr
y which if implemented can drastically reduce the cost of production. This cost
reduction can be realized through an improvement of business processes (investme
nt strategy, organizational aspects, flexible and just-in-time supply, etc.), pa
rtnerships with suppliers and service partners, as well as by the permanent opti
mization of production routes, equipment and logistics. Failing state of Coke Ov
en Batteries which need immediate reconstruction to produce Coke urgently needed
for survival of Blast Furnaces, as well as Billet Mills which is dependent on Co
ke Oven By-Product gases Coke-Oven Batteries, Hot Strip Mill and Steel Making De
partment remained totally ignored because of financial crunch and non-profession
al approach with which the mill was being run.

5) Utilities:
Electricity: Electricity is the main, most expensive and most consumed utility i
n melting industry, with a reported consumption range of 400-1300 kWh per ton of
product. About 96-99 % of the total electricity is consumed by the furnace; and
rest for other purposes including lighting, overhead crane and motors. Water: M
ajor common water uses include the following: o Make-up water for furnace coil w
ater-cooling tower o Cooling of moulds o Laboratory o Flue gas scrubbers o Human
use Fuel Gas: Fuel gas is primarily used, in some units, for preheating the lad
le. Gas is utilized, also, to meet some of the household requirements in the fac
tory as well as in the residential accommodations, if located within the premise
s of the industrial unit. Hundreds of steel re-rolling and re-melting mills in P
akistan either owes their very existence or depends heavily on the ship-breaking
industry for the supply of ship plates. The small re-rolling mills are worst hi
t by the non-availability of ship scrap as they entirely depends on ship plate c
ompared to the bigger ones which can afford to use a comparatively more expensiv
e iron billet of the Pakistan Steel. The small re-melting mills are facing a sim
ilar situation unlike the big counterparts, which can afford to use iron ingot.
The ship breaking industry is in crisis due to 1. Increase in international pric
es of ship scrap 2. High import duty 3. Excessive taxation
The idling of the ship-breaking industry have forced the steel re-rolling and re
melting mills, particularly the big ones, to replace comparatively less costly s
hip plate by a more expensive Pakistan Steel billet Compared to India (who is a
net exporter of steel) Pakistan has to import steel in order to meet its local d
emand. PSMCs entire product mix is sold locally with no export sales.
6) Environmental Issue
Steel melting furnaces: Steel melting industries are contributing heavily to air
pollution. Pollution is generated due to poor quality of scrap bundled. The ope
ration of the induction furnace produces metal dusts, slag and gaseous emissions
. 12 Kg of particulate matter is produced per ton of product (at the
3

most). The primary hazardous components of furnace dust are zinc, lead, and cadm
ium but its composition and contents vary with the scrap quality and furnace add
itives. Re-rolling mills: The only environmental related issue is the occasional
discharge of black smoke, which emit when the furnaces are run on furnace oil i
n winter
Recommendations: Improving Efficiency, Reducing Costs, and Increasing Overall Co
mpetitiveness.
Electric arc furnaces are a common method of reprocessing scrap metal to create
new steel, and this process does not need much electricity. This process can als
o be used for converting pig iron to steel. Ship breaking used to be a vital sou
rce of scrap for processing steel. However, the prices of ships have also increa
sed with demand for iron and steel. Due to the high profits and high freight rat
es shipping companies are extending the working period of their vessels to even
more than the normal usage life, i.e. 25 years, therefore leading to increasing
ships demand in international market. Rising scrap prices were forcing the price
s of steel products in country to shoot up which cannot be contained by furnace
casting mills them selves. Pakistans current steel demand is around 5 million ton
s per year and only 3 million tons is produced so the remaining gap of 2 million
tons steel is being imported in the country, he added.

Focused research and development activities in collaboration with foreign expert
s. Financial needs to be addressed by the banks. Management of Mineral Resources
. Beneficiation of low grade Indigenous Iron ore. Promote private public partner
ship in Steel sector.
3

Development of Human capital. Committee of technical experts should be formed to
study indigenous raw materials. Benchmarking studies, Countries using low grade
Iron Ore e.g. China , Germany , Mexico etc. Constitution of a coordination comm
ittee having members from both private sector and government. As the Chinese are
using Iron Ore with the properties similar to that of Pakistani Ore, a visit of
to Chinese Steel industry may also be arranged. The government should focus on
developing and supporting mini steel mills which require less capital investment
and based on supply from local iron ore deposits in Punjab, Khyber-Pakhtunkhwa,
and Baluchistan, say observers. These state of the art mini mills prove to be m
ore cost effective, require less capital investment and are easier to modernize
instead of revamping PSM which has out-dated technology and worn-out machinery.
But there are many hurdles to cross including importing under a clear and transp
arent scheme.
SHIP BREAKING & STEEL SCRAP
INDUSTRIES
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Ship breaking and Scrap Industries form a crucial component of the Pakistani Ste
el Industry. Without briefly touching upon the above mentioned industries would
be to formulate an incomplete report. The remaining part of the report briefly d
iscusses the Ship Breaking and Scrap Industries, which majorly provide the basic
raw material for the Pakistani Steel Industry. The ship breaking industry in Pa
kistan, which once occupied a second rank position in the world, was thrown into
a verge of collapse in the 1990s due to the ascendancy of influential political
power of a family having a significant interest in steel trade. In the 1970s it
provided direct jobs to some 100,000 workers and indirect jobs to over 500,000
persons. During this period, 150 ships used to enter Gaddani beach for ship brea
king purposes with more than 100 companies operating in the country. Gaddani shi
p breaking industry was considered as the largest and the best ship breaking cen
tre in the world. The years between 1969 and 1983 are considered to be thriving
periods of ship breaking industry in Pakistan. It was during this period that th
e ship building industry reached its zenith, leaving many other international sh
ip breaking industries far behind in terms of the total number of ships being br
oken down and the tonnage of ship scrap being handled. It is estimated that duri
ng these flourishing days, this industry contributed Rs5.3 billion to the nation
al exchequer taxes annually. The ship breaking industry did prosperous business
from 1970s to 1990s due to cheap labor availability and the large demand of ship
scrap from abroad. However, when government abruptly imposed duty on ship break
ing industry in the 90 s, it started to decline. After the Pakistan ship breakin
g industry came to a standstill in the 1990s, India and Bangladesh became the pi
oneers of the ship breaking industry in the world. Most of the foreign clients t
urned to them in this hour of critical crisis. Today both countries are prosperi
ng due to lower cost and less strict environmental and labor regulations. China,
an important contributor in ship breaking industry in the 90s is trying its bes
t to reposition itself. In India, the annual ship breaking figure has reached th
e level of above 3 million tonness followed by Bangladesh with 1.5 million tonne
ss. Hundreds of steel re-rolling and re-melting mills in Pakistan either owes th
eir very existence or depends heavily on the ship-breaking industry for the supp
ly of ship plates. The small re-rolling mills are worst hit by the non-availabil
ity of ship scrap as they entirely depends on ship plate compared to the bigger
ones which can afford to use a comparatively more expensive iron billet of the P
akistan Steel. The nonavailability of raw material, ship plate, has forced the e
xisting re-rolling mills to switchover to iron billet from the Pakistan Steel. T
his shift on the part of the re-rolling mills is resulted in increase demand for
the Pakistan Steel s billet, the price of which has registered a substantial in
crease. That explains the closure of tens of steel rerolling mills in Karachi du
ring last many years. A ray of hope emerged for the industry owing to global rec
ession that had hit the shipping industry as well. Major players were forced to
get rid of the old vessels instead of going for the mandatory dry-docking which
is a high-cost activity and there were strong indications last year within the c
ommunity of ship-breakers that over a thousand vessels could be scrapped during
2009 alone.
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Ship breaking boom has once again returned as more than 70 ships have arrived at
the Gaddani ship breaking industry from different countries for scrapping. The
removal of custom duty and sales tax had helped to revive this ship breaking ind
ustry after a pause of eight to ten years. This has given immense job opportunit
ies to people residing in that area and to those in the adjoining areas. It is a
nticipated that these ships would produce 500,000 tonnes of scrap for the steel
industry in the country. Since the ship scrap smuggling from Afghanistan and Ira
n has been halted, it might turn out to be beneficial to the industry.
Despite the tentative revival of Ship-breaking Industry of Pakistan through the
removal of import duties, it again faces the problem of a slowdown. The problem
initiated after re-rollable steel import has been given the green signal, the de
mand for regional steel scraps have plummeted seriously. This can have a negativ
e impact on its economy. The possibilities of large scale job loss and unemploym
ent looms large over the ship breaking industry of the country. To further aggra
vate the situation, already coupled with duty-free imports of rerollable steel,
and stiff competition from India & Bangladesh, the sharp rupee depreciation has
raised the cost of imported vessels and the business volumes have witnessed a sh
arp decline over the last three months which is contrary to happenings elsewhere
. How are ship-breakers in the neighboring countries able to quote competitively
? The answer lies in the strength of each currency against the greenback. A doll
ar, which values around 70 rupees in India and 68 taka in Bangladesh, is worth a
round 84 rupees in Pakistan. Simply put, in terms of local currency, Bangladeshi
ship-breakers pay 23,800 takas per LDT when they quote $350. In India, it is th
e equivalent of Rs24500, while in Pakistan one has to dish out an additional Rs4
,550 per LDT for the same quotation. When you pay at that exorbitant rate for th
e vessel and then the local market quotes Rs36,000 for the scrap, it is just not
worth it. Other factors include a vibrant local manufacturing base in India whi
ch keeps the demand for steel almost always high. Bangladesh doesnt have an indus
trial base anywhere as massive as Indias, but it has one of the lowest labor rate
s in the world which is said to be less than half of what it is in Pakistan. Int
erestingly even the most unskilled of labourers at Gadani makes a minimum of Rs8
,500 per month, which, by the way, is over 40 per cent more than the minimum wag
e set by the government. In Bangladesh, you would get the same amount of work do
ne for 3,000-3,500 takas. The difference, as you can see, is huge. Which, incide
ntally is good for the people but not for the industry. The overall cost of doin
g business is also against local ship-breakers, they argue, basically citing gas
tariff which, according to them, is too high for an industry which is almost en
tirely dependent on it for making its giant mechanical cutters functional.
3

To summarize about 80 per cent of a ship s steel is "reusable steel" cheaper tha
n primary steel and used mostly in construction and astonishingly 80 per cent of
the worlds ships are being dismantled in two countries Bangladesh and India. Pak
istan, on the other hand, is struggling to meet the challenge on various counts,
due to the policies and conditions mentioned earlier. To speak optimistically P
akistan possesses a strategic proximity advantage over India and Bangladesh as i
t is close to Dubai ports. Guided with supporting government policies, and gener
al overhaul, the Pakistani Ship-breaking Industry can regain its lost pride and
position. Recommendations for the Improvement of Ship- breaking Industry In orde
r to increase exports, the ship breaking industry has to be upgraded by the intr
oduction of latest technology. Provision of gas, electricity, water, medical rec
reational and housing should be made available for the workers in this industry.
Special care needs to be taken in the handling of dangerous equipments. The rel
evant laws concerning safety and health use must be implemented strictly through
a proper system. Moreover utility stores need to be established. The government
must also ensure that toxic substances are not allowed to drain off into the se
a which cause water-pollution and injure marine life.
FUTURE PROSPECTS
3

Extracting domestic Iron-Ore Reserves
According to the Geological survey of Pakistan, Kalabagh (Mianwali district) hol
ds substantial iron ore reserves at an approximate 9,300 million tons. Given thi
s, the idea of constructing the second largest steel mill at Kalabagh was explor
ed by the Musharraf regime in 2004.
Local raw material procurement would be a blessing to the countrys national exche
quer and those who painstakingly import raw materials from countries such as Ind
ia, Iran and Turkey.
3

Al-Tuwairqi Steel Mills
TSML is the country s first private-sector integrated environment-friendly steel
manufacturing project of Al Tuwairqi Holding, Kingdom of Saudi Arabia. Its comp
lex spreads over an area of 220 acres at Bin Qasim, Karachi, and employs the wor
ld s most advanced DRI (Direct Reduction of Iron) technology. Currently it has b
een installed with an operational capacity to produce 1.28 million tonne DRI per
year, which is further planned to be augmented to such an extent so as to repla
ce Pakistan Steel Mills as the largest Steel Mill in Pakistan.
TSML will not only be a source of transfer of the latest technology of quality s
teel making, it will also be helpful in giving impetus to the industrial progres
s in Pakistan. It will open up new avenues of investment in similar plants besid
es giving a boost to the downstream industries of the country. In the context of
human resource development, TSML will create around 1,000 direct and about 3,50
0 indirect job opportunities.
3

BIBLIOGRAPHY
3

http://www.nationsencyclopedia.com/Asia-and-Oceania/PakistanINDUSTRY.html#ixzz0s
n556kfD http://www.arabianbusiness.com/591597-weak-gulf-steel-demand-couldlead-t
o-oversupply http://steel.pk/ http://tribune.com.pk/story/13721/steel-industry-b
eset-with-problemsdespite-bright-prospects/ http://steelguru.com/interview/detai
l/132/Making_Pakistan_steel_sector_str ong.html http://www.onepakistan.com/finan
ce/news/pakistan-business-generalnews/4198-Year-end-review.html http://www.fandm
mag.com/web/online/Industry-News/Pakistan-Proposesto-Link-Domestic-Steel-Priceswith-International-Market-Rates/1$3435 http://scrapnews.recycleinme.com/newsdeta
ils-20.aspx http://steeltimesint.com/news/view/pakistan-has-the-potential-to-inc
reaseits-steel-production-to-16mt-y http://rupeenews.com/2008/06/12/the-2nd-majo
r-steel-mill-for-pakistan/
3

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Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan o Strengths:.................

Ship breaking & Steel Scrap industries.................................47 Future

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan 1. 2. 3. 4.

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan 14 15 16 17 18 19 20 21 22 23

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

Manzoor Ahmed Wattoo, Pakistan s Minister of Industry and Production, recently s

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

A Brief Analysis of the Steel Industry in Pakistan

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