Amreli Steels cuts production by 30% amid economic challenges

Amreli Steels has announced to temporarily shut its Karachi facility, which accounts for 30% of company’s total production.

Amreli Steels' directors highlighted the severe economic challenges plaguing the documented steel sector. These issues, exacerbated by economic and political factors, include declining demand for steel rebars, rising utility costs (especially electricity), high interest rates, an unbalanced tariff structure, heavy tax burdens, smuggling, and increased undocumented activities. These factors have led to unfair competition and significant market disruption.

Given these unprecedented macroeconomic conditions, the Board has decided to temporarily suspend operations at its oldest manufacturing facility in Karachi, the SITE Rolling Mill (SRM), which accounts for 30% of the company's total production capacity.

This suspension will be reviewed in six months, with the possibility of reopening if conditions improve. Meanwhile, Amreli Steels will continue to operate its Dhabeji facility, which represents 70% of its production capacity, to meet ongoing and future steel demand.

Pakistan's annual demand for steel products was approximately 11.2 million metric tons (MT) in FY22, with imports making up about 39.2% of total consumption. In FY23, billet production was recorded at 5.4 million MT, while hot and cold rolled sheets (flat products) production stood at 3.6 million MT. Major listed companies in the billet manufacturing segment include Amreli Steel, Mughal Iron & Steel, and Agha Steel Industries. This industry segment is highly fragmented, with numerous small private players.

Pakistan imports most of its raw materials for steel production, primarily steel scrap, with a small portion of iron ore sourced locally. The majority of these raw materials are imported from China. In FY23, the total import value of iron and steel scrap was approximately USD 3.0 billion. This high dependence on imported raw materials makes the sector vulnerable to international price fluctuations and exchange rate changes.