NATIONAL STEEL ADVISORY COUNCIL

MONTHLY STEEL NEWSLETTER – JUNE 2020

“Make Steel in Pakistan”

Complete Picture of Recent Developments in Pakistan’s Steel Industry, Global Steel

Markets, Pakistan’s Steel Imports Statistics and Future Plan of Action.

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National Steel Advisory Council’s Monthly Newsletter

Your Market – Our Analysis NSAC

PSM’s fortunes hang by a thread

As the government is reportedly

looking to privatize Pakistan Steel

Mills (PSM), among other state-

owned enterprises (SOEs), it should

know that regardless of the debate

that whether SOEs should be

privatized or not, given the current

pandemic and with it the existence

of lockdowns in many parts of the

world, these times of great

economic uncertainty do not

present themselves as surely the

best time.

Overall, even if the privatization

aspect is put aside, the impact of

covid-19 in terms of FDI, much

needed employment opportunities,

and built-up in reserves and with it

stability to currency that FDI could

provide, and which is much needed

given the country is struggling on all

these counts for many years now,

the outlook for FDI brings little hope.

This is all the more disturbing, given

countries, especially mostly highly

indebted developing countries like

Pakistan, are also facing negative

pressures in terms of exports and

remittances, in the wake of

recessionary trends taking hold

globally.

Steel Sector demands rectifications in Finance Bill 2020

The Finance Bill 2020 came up with reductions

in Regulatory Duty(RD) on Hot Rolled Coils

under PCT Heads 7208, 7225 and 7226.

Further, new slabs for Advanced Tax at import

stage were introduced via the 12th Schedule

having reduced the aforesaid Tax for Flat Steel

and Alloyed Bars/Rods from 5.5% to 2% at

import stage.

Also, a section was introduced in the Finance

Bill 2020(Page # 29) that grants high

concessions to Wire Rod Manufacturers on

imports of steel Billets. This step was highly un-

welcomed by the long steel sector of Pakistan

and as a result many organizations and

associations, including the National Steel

Advisory Council have expressed their

concerns to the relevant authorities for the

removal of this anomaly in Budget 2020-21.

However, the NSAC believes that many factors

were left un-addressed in the Finance Bill

2020, which include but are not limited to, the

following;

1) Heavy Meltable Scrap(7204.4990) is again

missing from the First Schedule and Hence the

Customs Duty on HMS still exists.

2) No discussion of clause(iv) of SRO 641 in the

Finance Bill 2020.

3) Turnover Tax, which has been a major issue for

the declining steel sector of Pakistan, has not been

yet reduced.

4) Tax Adjustment still amounts to 90% for the steel

sector, whereas PSM has been granted 100% input

tax adjustment despite being un-operational.

5) ITP Fixed valuation for steel scrap @ $360 per

MT instead of actual transactional valuation.

The Budget 2020-21 also stated that Additional

Customs Duty shall be removed on items that

currently attract 0% customs duty, also the

regulatory duties might be waived off on

various industrial raw materials.

However, these changes and the commodities

falling under these changes, shall be confirmed

via Statutory Regulatory Orders that might be

issued later this month or in the month of July

by the relevant ministries.

HIGHLIGHTS

Pakistan’s Steel Sector P.1

Global Steel Market P.2

Pakistan’s Wire Rod Industry P.3

Trends & New Software P.4

IS SUE

J U N E 2 0 2 0

JUNE

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Since China's coronavirus

lockdowns were eased,

construction activity has risen

sharply but manufacturing has

not.

Behind the boom in China's steel

production since March - and

hopes for a quick economic

recovery - is a tale of two

diverging sectors: construction

demand for infrastructure

projects has been strong, while

manufacturing has been slower

to bounce back.

That highlights the challenge

facing policymakers: Beijing

and local governments can

control the pace of spending on

projects like roads, rails and

reservoirs, but have very

limited options to support

exports or domestic demand for

machinery and appliances.

Analyzing the above factors we

reach to the conclusion that:

There is only so much China's

steel industry can do while the

rest of the world struggles.

Trending in Global Steel

Markets:

China Steel Corporation(CSC)’s

Sales fall to a 63-month low.

India's crude steel output falls

39% to 5.8 MT in May.

US Supreme Court rejects

challenge to steel import

tariffs.

Chinese construction steel prices

dip amid cluster of new

coronavirus cases

Japanese Scrap Prices fall

significantly in Vietnam.

UAE Steel Exports surge, imports

decline, in June 2020.

Imported Billets Prices stay flat at

$400-$415 per Ton in Asia

HRC Markets worldwide, regain

strength.

Global Tubes/Pipes demand

plunges amid pandemic outbreak.

Sources: Worldsteel Association,

Kallanish, Mysteel, S&P Global,

MetalMiner, MetalBulletin.

Demand for the main steel

products used in construction -

rebar and wire rod - has accounted

for an average over 53 percent of

total steel demand since late March

Yet the surge in overall steel

production - driven by a 59 percent

jump in rebar and 40 percent rise in

wire rod output since mid-March -

suggests the sector is at risk of

over-supplying the market just as

demand is expected to take a hit

from rained-out work sites,

especially across the south. The

monsoon season, which runs

through August, arrived 10 days

earlier than normal in southern

China this year, causing

widespread floods that have

already stopped work at some

sites.

Global crude steel output slipped

8.7% in May to 148.8 million tonnes as

many steelmakers shut operations

due to the COVID-19 pandemic, even

as top producer China was resilient

and pumped out more of the metal.

Crude steel output from China, also

the world's biggest consumer of the

metal, increased 4.2% year-on-year

to 92.3 million tonnes in May.

But production tumbled 36.6% in the

United States, 31.8% in Japan and

26.8% in the European Union, the

data showed.

The decline in Japan, the world's No.

3 steel producer, was the steepest

monthly slide since June 2009,

according to an analyst at the Japan

Iron and Steel Federation, which

released data on Monday.

Indian output slid by 39.1%, while the

drop in South Korean production was

less severe, at 14.1%, World Steel

said.

The Worldsteel Association

forecasted earlier this month that

global steel demand was expected to

fall 6.4% this year, but bounce back

next year.

Why a surge in demand for steel in China masks economic trouble?

Global steel output falls

8.7% in May, but China lifts

production

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INSIGHTS – PAKISTAN’S WIRE ROD INDUSTRY

NSAC’s Letters to Authorities

Letters sent to the Provincial as well

as the Federal Government seeking

relief for the steel sector of Pakistan

provided the consequences of

coronavirus outbreak. These letters

are available on the official website of

National Steel Advisory Council which

were accompanied by Press

Releases on various platforms to

keep the relevant authorities abreast

of the current situation of Pakistan’s

steel industry.

BUDGET 2020-21

The NSAC’s Steel Budget Flash

provides a brief outlook of steel sector

in Budget 2020-21.

To tackle the anomalies in the

Finance Bill 2020, the National Steel

Advisory Council has been actively

engaged with the relevant authorities

and committees. In this regard, the

NSAC, on behalf of Pakistan’s steel

melting, flat products and steel

tubes/pipes manufacturing industry,

have subsequently addressed the

Technical Anomaly Committee and

the Business Anomaly Committee

formed by the FBR, to rectify the

anomalies that would hurt the

domestic steel industry of Pakistan

and take measures that would

encourage local production instead of

relying on imports of finished steel

products.

Pakistan’s Wire Rod Manufacturing

Industry is not fragmented and the

production capacity ranges from

250,000 MT to 350,000 MT

approximately.

Currently, the industry is well

protected with the minimum total

effective import duty of 43% on

imports of wire rod.

The streamline wire rod

manufacturers utilize steel billets as

their raw material feed which is

obtained from the domestic long

products industry.

According to the data by National Steel

Advisory Council(sourcing PRAL), The

Wire Rod manufacturers in Pakistan

have been mostly importing Alloy

Bars/Rods under PCT Head 7227.9000

in the Financial Year 2019-20.

The quantity amounts to at least 50,000

Metric Tons in the FY2019-20 with

more than 90% of imports coming from

China.

The Flat and Long Products imports

from China are categorized as “Alloy”,

since Chinese exporters add traces of

alloying elements to get rebate from

their Government.

However, it was proposed in the

Finance Bill 2020 that the Sales Tax

Registered Wire Rod Manufacturers

shall be allowed to import Billets at a

total effective duty of 5%.

This concession shall encourage Billet

imports and would further cause

troubles to the sinking steel melting

industry of Pakistan.

Even if an estimate of 150,000 MT of

Billets is imported, it would not only hurt

the national revenues but also the

domestic capacity utilization in the long

steel sector of Pakistan which is already

facing problems in terms of tax regimes

and anomalies in tariff structure.

THIS MONTH’S INTERESTING READ

DUBAI’S MUSEUM OF FUTURE

One of the most challenging and unique building projects in the

world. the uniqueness of Dubai’s new Museum of the Future is

factually correct, its extraordinary form made possible by its steel

superstructure and façade.

When it is completed in 2021, the 78m-tall Museum of the Future will

be a showcase for innovation and technology.

This structure, will be a remarkable display of rich Arabic calligraphy

embedded onto stainless steel panels and promotes the cause of

sustainability in steel-making.

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Table below shows Pakistan’s steel imports in the month of MAY 2020 under PCT Chapter # 72

CATEGORY MATERIAL HS CODES QUANTITY(MT)

FLAT PRODUCTS

ALLOY COILS 7225 47,552

HOT ROLLED PRIME 7208.XX90 28,252

HOT-DIP GALVANIZED COIL (PRIME) 7210.4990 9,696

COLORED COILS PRIME 7210.7010/7090 7,557

COLD ROLLED PRIME 7209.XX90 6,257

HOT ROLLED STRIPS 7211 (except sub-head 23) 5,492

COLD ROLLED SECONDARY 7209.XX10 2,565

HOT-DIP GALVANIZED COIL (SEC) 7210.4910 1,977

HOT ROLLED SECONDARY 7208.XX10 36

FLAT PRODUCTS TOTAL 109,384

IRON/STEEL SCRAP

MELTABLE/SHREDDED SCRAP 7204.3000/4100 136,447

HEAVY MELTABLE SCRAP 7204.4990 73,447

RE ROLLABLE SCRAP 7204.4910 29,091

OTHER STEEL SCRAP REMAINING SUB-HEADS 7204 21,107

AUTO PARTS SCRAP 7204.4920 454

IRON/STEEL SCRAP TOTAL 260,546

LONG PRODUCTS

ALLOY BARS/RODS 7227, 7228 10,243

CARBON STEEL BARS AND RODS 7213, 7214, 7215 2,498

WIRE ROD 7217, 7229 740

BILLETS 7207 663

ANGLES/STRUCTURES 7216 3

LONG PRODUCTS TOTAL 14,147

STEELMAKING RAW MATERIALS

FERROALLOYS 7202 3,658

DRI/HBI 7203 10,768

PIG IRON 7201 270

STEELMAKING RAW MATERIALS TOTAL 14,696

NSAC’s Steel Tariff Handbook 2020 with detailed break-up of duties covering PCT Chapter 72 and Chapter 73 is

now available, access is limited to Council Members Only.

DISCLAIMER

DISCLAIMER __________________________________________________________________________________

National Steel Advisory Council. All Rights Reserved.

The information contained and presented in this report is for illustrative and

educational purposes only and should not be relied upon in making any

investment/strategic decision. The past performance of any commodity, derivative or

any news referred to in the report, can not be relied upon as a guide to its future

performance.

Whilst every effort has been made to ensure proper sourcing and authenticity of

figures.

The National Steel Advisory Council will not be liable in respect of any business

losses. The outcomes, interpretations and conclusions expressed in the report do not

necessarily reflect the views of the entire domestic steel industry or the members of

the National Steel Advisory Council.

nsac.org.pk

Meraj A. Khwaja

Chief Executive Officer

meraj.khwaja@nsac.org.pk

Hamza Jabbar

Research Engineer

hamza.jabbar@nsac.org.pk

About NSAC

The National Steel Advisory Council(NSAC) is an association of major iron and steel producers of Pakistan.

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 and Environmentally-friendly Steel.