Strengthening iron and steel industry

The significance of Iron and Steel Industry can’t be denied in the modern age. It is considered as ‘Steel Age’, where economic progress and development of a country depends to a greater extent on Iron and Steel Industry. Iron and steel is indispensable to use for making various goods for industry and daily life such as right from manufacturing a sewing needle to aircraft all the goods require iron and steel to come into being.

In Pakistan, steel industry exists since it came into being (1947). As after independence Pakistan had a single plant as “Pakistan Railway Steel Mills Lahore” (PRSML). The requirement of Engineering Plant as well as Steel Plant was the need of that time. Therefore in 1951, Batala Engineering Company (BECO) privately integrated plant was established to cater the requirements of engineering developments in the country. After take over by the Government in the year 1972 under the economic reforms, it was renamed as Pakistan Engineering Company (PECO). The areas focused after take over were Steel Making where three Electric Are Furnaces of 10 tons each, Steel Rolling Mills to roll bigger size steel angles were added in line with future trends.

PRSML served a valuable source of training for the establishment of private steel industry of Pakistan in 1960’s. Later in 1960’s foundation stone were laid by Ittefaq foundry. In private sector steel industry, Ittefaq Foundry particularly played very important role in the development of Pakistan at that time.

Steel consumption increases when economy grows as a result governments invest in: Infrastructure, transport, constructing new factories and plants. During 1970s, large government investments established Pakistan’s first only Public owned Pakistan Steel Mill (PSM), aimed at providing basic raw material to local high-tech industries in Pakistan with an annual production capacity of 1.1 million tons. The main products of Pakistan Steel are pig iron, billets, blooms, slabs, hot rolled coils / sheets, galvanized sheets etc.

Now days re-structuring of Pakistan Steel is under active consideration. While addressing a recently held seminar on Steel Mills deficit in Karachi press club, Mir Hazar Khan Bajrani (Minister for Industry and Production) strongly hopes that the present government is capable to pull PSM out of deficit and will not allow privatizing of PSM.

Though PSM is the only venture in public sector steel industry and nominal production capacity of Public Steel Sector in country includes People Steel Mills, Heavy Mechanical Complex Texila, Shipyard Engineering Karachi, Wah Ordinance and PECO which is less than 1 Million Tons per annum. The main products of Public and private steel industry include reinforcement bars, I-BEAMS, CHANNEL, Billets, Spring Steel and Steel Castings.

On the other hand production capacity of Private Steel Sector embraces hundreds of steel melting units is approximately 4 million tons (2010) excluding last one year or so. However demand of steel in Pakistan is more than 8 million tons. Due to the after affects of global recession, shortfall of gas, electricity and other influencing factors private steel sector of Pakistan has produced around 1.6 – 1.8 MT of crude steel in the last year. Both private and public sector conjointly produces less than what is required and creating a large gap between demand and supply.

Globally, in recent past year’s production of crude steel has risen astoundingly at the production rate of 1.2 million metric tons annually. In Asia China is recognized as a global steel leader, producing 538 MT of crude steel which is the one third of the total world steel production. With 118 MT production rate along this Japan has also achieved competitive market structure in steel industry. Certainly today, it is difficult to imagine a world without steel.

However in terms of purchasing power the economy of Pakistan is the 27th largest economy in the world. It is estimated that per ca-pita consumption of steel in Pakistan is only 38 kg compared to the global average of 175 kg. On the basis of existing structure of steel industry in Pakistan even a modest increase in per ca-pita steel consumption could be achieved to 80 kg in the next 10 years. According to the statistics for 2009, the world crude steel production stood at 1.2 billion tonnes, wherein Pakistan’s share is merely about 0.24 percent. This is an indicative of immense growth opportunities and investment potentials in the steel sector of Pakistan.

During last couple of years global economical crunch has also affected Steel Industry of Pakistan when our local industry is already struggling with overwhelmed constrains like poor supply of electric power, insufficient & none permanent supply of gas, higher percentage of taxes on imports of raw material, scarcity of modern technologies and techniques. As a matter of fact any industry cannot grow until it adopts the modern techniques and technology, trained their employees, consulting to professional experts and fostering engineering culture.

Steel is no more a labor-intensive industry it used to be. It has changed dramatically into modern steel plants where very few people are employed. Additionally rapid growth, innovation and technology have put immense pressure on companies all over the world. Companies are investing in state of the art steel making systems and practices to enhance their operations and yield. By adopting modern technologies and equipments companies enhance their production capacity as well as to minimize the product cost. Direct Reduced Iron (DRI) one of the most demanded output of steel industry and prime quality of liquid steel, companies prefer electrical arc furnace rather than Induction Furnace. This is preferred and the foremost adopted technology since it maximizes the percentage of DRI melting.

Adoption of technology has also emerged challenges for human resource management.  Such as In South Korea, POSCO employed 10,000 people to produce 28 million tonnes of crude steel. As a rule of thumb, one can put the direct employment potential at 1,000 per million tonnes of crude steel. Therefore, the steel industry has reduced the manpower around the world by more than 1,500,000 in last 25 years. According to some estimates one person-year of employment in the steel industry generates 3.5 person-years of employment elsewhere.

Today, Pakistan needs a number of quality steel manufacturing projects so that it does not only become self-reliant in the steel sector but also can enhance its share in the global engineering arena, certainly which is a multi-billion dollar market.

The large Iron Ore and coal reserves of Pakistan together with some liberal investment policies could provide good opportunities to investors in steel industry. Such as, Al-Tuwairqi Holding Saudi Arabia has put a huge investment in Pakistan to establish state of the art DRI plant in Karachi and this will start production of 1.28 MT of DRI by the Q4 of 2010.

The leading Steel Mills Manufactures, Industry Champions, Pakistan Steel Melters Association, Pakistan Steel re-rolling mills association, Pakistan Foundry Association, investors and technical experts should rigorously evaluate investment potentials in the steel sector of Pakistan. To strengthen steel industry and setting up new plants in Pakistan following are essential to take into account:

1. Locations of Iron Ore Deposits of Pakistan
   1. Pakistan having promising reserves of Iron Ore is an ideal country for establishing a steel producing plant.
   2. Need of the time that government should also play its vital role to explore the ore mines to support private as well as public sector of steel industry.
2. Production practices, technologies and process in vogue
   1. Companies should adopt modern technologies and should prefer to go for latest developed plants instead of traditional low cost projects producing steel at a low rate with product cost.
3. Trends of Steel Production & Consumption
   1. Modern trends like usage of DRI in EAF / IF to produce better quality of steel as a quality conscious organization should be taken into accounts.
4. Steel Demand and supply exploration for next decade
   1. As a matter of fact there is a huge gap between the demand and supply of steel in Pakistan. So this is a multi-billion dollars market for investors in the steel industry.
5. Technology suitable for use of indigenous raw material
   1. Before putting a steel plant a thorough and detailed study of the market as well as resources is important to select the technology as well as the process to produce steel in Pakistan.
6. Investment opportunities in Steel Sector
   1. Being an ideal place in terms of available resources and other opportunities

This is not the last never the least, though we are not producing as per the requirement but we are hopeful that we will InshAllah become self-reliant very soon.