Steel industry hit by rising imports, weak demand

International experts have noted that the steel industry is crucial for both manufacturing and construction. It plays a key role in producing products such as cars, appliances, and buildings. In recent years, the industry has faced challenges due to global economic fluctuations, technological advancements, and environmental concerns. However, in 2024, the steel industry is expected to experience positive trends as demand for steel products continues to grow. This rising demand is driven by the expansion of infrastructure projects, the automotive sector, and manufacturing activities worldwide. Statistics show that world crude steel production for the 71 countries reporting to the World Steel Association (worldsteel) reached 152.8 million tonne in July 2024, a 4.7 per cent decrease compared to July 2023.

In the developing countries like Pakistan, the government of Pakistan recorded that the steel industry faces multifaceted challenges, including high energy costs, heavy reliance on imported raw materials, competition with sub-standard products because of insufficient regulation, and the threat of dumped imported products. The sluggish demand from complementary industries like electrical equipment, automobiles, heavy machinery, sewing machines, and sugarcane machines resulted in low utilisation of flat steel. Statistics from the State Bank of Pakistan (SBP) reveals a significant rise in the import of finished steel and iron scrap during FY2024 compared to the last fiscal year.

From July to May of FY2024, imports surged as reported in the SBP’s present statistics, highlighting notable changes from FY2023. Imports of iron and steel scrap notably grew by 46.5 percent, reaching $1.556 billion in the first 11 months of FY2024, compared to $1.062 billion in the entirety of FY2023. Similarly, imports of finished iron and steel products grew by 22 percent to $2.062 billion during July-May FY2024, up from $1.686 billion in FY2023. During the first half of FY2024 the steel sector saw a 1.4 percent contraction in production, compared to a 2.1 percent fall in the corresponding period last year. Production of flat and long steel fell by 1.8 percent and 0.8 percent respectively.

Statistics showed that the Large-Scale Manufacturing exhibited minimal growth in FY2024, following a 10 percent contraction in FY2023. As the government of Pakistan strives for recovery amid ongoing challenges, the steel sector sees a modest fall in prices. This drop is indicative of gradual economic stabilisation and resilience in the face of adversity.

Consumers, grappling with the burden of inflation, find relief as steel prices dip by Rs5,000 per ton. This reduction offers a reprieve for individuals and businesses navigating challenging economic conditions. The fall in steel costs presents an opportunity for the construction sector, providing impetus for ongoing projects and incentivizing new investments. Affordable steel prices fuel optimism for infrastructure development and urban expansion. Statistics also showed that a breakdown of steel prices reveals variations based on size and brand. From 3 sutar per 10mm to 8 sutar per 25mm, steel rates range from Rs258,000 to Rs260,000 per metric ton. Branded steel options provide consumers with diverse choices, each reflecting competitive pricing strategies. No doubt, the availability of affordable steel not only supports immediate construction needs but also fosters long-term economic sustainability. It is anticipated that declining steel prices will contribute to Pakistan’s economic revival, driving growth and prosperity across sectors.