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A Brief Analysis
Submitted by: CHOUDHRY JAWAD UR REHMAN
29/07/2010
APPENDIX
Introduction.........................................................................5 Steel.....................................................................................................................6 Significance of Steel Industry in Economic Growth.........................................6 Steel Recycling....................................................................................................7 Production Process...............................................................8 Basic Steelmaking Process.................................................................................9 Various Steel melting processes.......................................................................10 o Electric arc Furnace.............................................................................10 o Bessemer method..................................................................................10 o Open Hearth method............................................................................10 o Basic oxygen method............................................................................10 Raw 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 countries 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: WorldSteel Short Range Outlook.............................27 Historical Analysis of Steel Industries in Pakistan.................28 Historical Analysis of the Steel Mill Projects in Pakistan..............................29 Steel Mills in Private 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:.................................................................................................42 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 Environmental Issue............................................................................45 Recommendations.............................................................................................46
Ship breaking & Steel Scrap industries.................................47 Future Prospects................................................................50 Extracting domestic Iron-Ore Reserves...........................................................51 Al-Tuwairqi Steel Mills....................................................................................52 Bibliography.....................Error: Reference source not found53
INTRODUCTION:
A WORD ABOUT STEEL AND ITS SIGNIFICANCE IN ECONOMIC GROWTH
Steel
3
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 elements are used, such as manganese, chromium, vanadium, and tungsten. Carbon and other elements act as a hardening agent, preventing dislocations in the iron atom crystal lattice from sliding past one another. Varying the amount of alloying elements and form of their presence in the steel (solute elements, precipitated phase) controls qualities such as the hardness, ductility, and tensile strength of the resulting steel.
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 economic development. The volume of steel consumed has been the barometer for measuring development and economic progress. Whether it is construction or industrial goods, steel is the basic raw material. However with the advancement in technology, lighter metals and stronger alloys have been developed. Plastics and synthetics have replaced steel in many areas. Still, Steel today is one of the most common materials in the world, with more than 1300 million tons produced annually. It is a major component in buildings, infrastructure, tools, ships, automobiles, machines, appliances, and weapons.
Steel Recycling
Steel is 100% recyclable, and because it maintains its properties through successive product cycles without a loss of quality, it can be recycled an unlimited number of times. It is easy to handle and separate from other materials in the recycling 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 consistently 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 Steel is 100% recyclable, the actual percentage appears low because a large proportion of steel products (such as buildings, bridges, and cars) have long life cycles. There is not enough recycled steel to meet societys increasing demand for steel. Demand for steel is 50% greater today than 10years ago, so current steel production requires still iron ore. Thus Demand for Steel is met through the combined use of recycled steel as well as iron ore. Both primary and secondary raw materials are necessary to further the industrys economic, environmental, and social sustainability performance. Recycled steel is a very valuable secondary raw material. A dedicated infrastructure exists worldwide to ensure the most efficient 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 inherent physical properties during the recycling process, and has drastically reduced energy and material requirements compared with refinement from iron ore. There is often very little waste produced during construction, and any waste that is produced may be recycled.
PRODUCTION PROCESS
1. First, iron ore is reduced or smelted with coke and limestone in a blast furnace,
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, phosphorus, and
excess carbon are removed and alloying elements such as manganese, nickel, chromium 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 century, steel became an inexpensive mass-produced material. Further refinements in the process, such as basic oxygen steelmaking, further lowered the cost of production while increasing the quality of the metal.
Electric high-frequency furnace and crucible processes Electric arc Furnace Bessemer method Open Hearth method Basic oxygen method
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 iron and oxygen. The major iron oxide ores are
Iron making furnaces require at least a 50% iron content ore for efficient operation, also, the cost of shipping iron ores from the mine to the smelter can be greatly reduced if the unwanted rock and other impurities can be removed prior to shipment. This requires that the ores undergo several processes called "beneficiation." These processes include crushing, screening, tumbling, floatation, and magnetic separation. The refined ore is enriched to over 60% iron by these processes and is often formed into pellets before shipping. The three raw materials used 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 (CaO), which are added to the blast furnace at intervals, making the process continuous. The limestone or burnt lime is used as a fluxing material that forms a slag on top of the liquid metal. This has an oxidizing effect on the liquid metal underneath which helps to remove impurities. Approximately two tons of ore, one ton 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 hardened 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 amount it is considered to be cast iron, in which the excess carbon forms graphite. The metal manganese is used in small amounts (0.03-1.0%) to remove unwanted oxygen and to control sulfur. Sulfur is difficult to remove from steel and the form 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 commercial steels is usually kept below 0.05%. A small quantity of phosphorus (usually below 0.04%) is present, which tends to dissolve in the iron, slightly increasing the strength and hardness. Phosphorus in larger quantities reduces the ductility or formability of steel and can cause the material to crack when cold worked 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 ductility. The silicon also deoxidizes the molten steel through the formation of silicon dioxide (SiO2), which makes for stronger, less porous castings.
Another element that plays an important part in the processing of steel is oxygen. Some large steel mills have installed their own oxygen plants, which are located 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, molybdenum, nickel, aluminum, cobalt, tungsten, vanadium, and titanium, and with nonmetals such as boron and silicon.
INTEGRATED MILL:
Integrated mills are large facilities that are typically only economical to build in 2,000,000 ton per year annual capacity and up. Final products made by an integrated plant are usually large structural sections, heavy plate, strip, wire rod, railway rails, and occasionally long products such as bars and pipe.
An integrated steel mill has all the functions for primary steel production:
Iron Making (conversion of ore to liquid iron), Steelmaking (conversion of pig iron to liquid steel), Casting (solidification of the liquid steel), Roughing Rolling/Billet Rolling (reducing size of blocks) Product Rolling (finished shapes).
Because of the energy cost and structural stress associated with heating and cooling a blast furnace, typically these primary steelmaking vessels will operate on a continuous production campaign of several years duration. Even during periods 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 financially assist an obsolescent facility rather than take the risk of having thousands 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 byproducts of manufacturing. A typical mini-mill will have an electric arc furnace 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 solid form, a reheat furnace and a rolling mill. Often a mini-mill will be constructed in an area with no other steel production, to take advantage of local resources 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 transportation and agriculture. Capacities of mini-mills vary; some plants may make as much 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 tons per year of finished product. Since the electric arc furnace can be easily started and stopped on a regular basis, mini-mills can follow the market demand for their products easily, operating on 24 hour schedules when demand is high and cutting back production when sales are lower.
Uses
Iron and steel are used widely in the construction of roads, railways, other infrastructure, applicances, and buildings.
A Brief Analysis of the Steel Industry in Pakistan 1. Most large modern structures, such as stadiums and skyscrapers, bridges, and
airports, are supported by a steel skeleton. Even those with a concrete structure will employ steel for reinforcing.
3. Steel is used in a variety of other construction materials, such as bolts, nails, and
screws.
Stainless steel
Cutlery Rulers Surgical equipment Wrist watches
Steel consumption increases when economies are growing, as governments invest in infrastructure and transport, and build new factories and houses. Economic recession meets with a dip in steel production as such investments falter. If you were 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 periods of prosperity and growth, most notably in the 1950s and 1960s. However, steel 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 West, steel is referred to as a sunset industry. In the developing countries, the sun is still rising, for most it is only a dawn. Towards the end of the last century, growth of steel production was in the developing countries such as China, Brazil and India, as well as newly developed South Korea. Steel production and consumption grew steadily in China in the initial years but later it picked up momentum and the closing years of the century saw it racing ahead of the rest of the world. China produced 220.1 million tonnes in 2003, 272.2 million tonnes in 2004 and 349.36
Steel production:
1999
Steel production:
2009
Geographical distribution
Geographical distribution
Steel Use:
1999
Steel Use:
2009
Geographical distribution
Geographical distribution
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
Russia
Belgiu
Germa
Rank Country/Region 2007 World 1,351.3 1 People's Republic of China 494.9 European 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 Ukraine 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
Rank Company 1 2 3 4 5 6 7 8 9 10 11 12 13 ArcelorMittal Baosteel POSCO Nippon Steel (1) JFE Tata Steel (3) Ansteel Severstal Evraz U.S. Steel Shougang (4) Gerdau
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 Usiminas 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
Metalloinvest 6.5
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) IMIDRO 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 Duferco 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
1. China 567.8 mmt 2. Japan 87.5 mmt 3. India 62.8 mmt 4. Russia 60.0 mmt 5. United States 58.2 mmt
Total world production was 1,226.5 mmt in 2009, down from 1,329.0 mmt in 2008. The 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
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 China, South Korea
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 MENA 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%
During the last three years PSM was totally dependent on imported raw material since there was disruption in supply of local raw material because of poor law and order situation. The local raw material otherwise also partially supplemented the requirements of the mill. The global recession and fluctuation of prices at
Keeping in mind the recent the recent development, Saudi Arabia has also invested in the Pakistan Steel industry through renowned company "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 complex spreads over an area of 220 acres at Bin Qasim, Karachi, and employs the world's most advanced DRI (Direct Reduction of Iron) technology based on the MIDREX process. After completion Al-Tuwairqi would be operational with an installed 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
If everything goes according to plans, Tuwairqi Steel Mills Limited (TSML) aims to start production by the beginning of the fourth quarter, 2010. The construction of the plant took about three years and there was a nine-month delay due to finalizing procedures, but now construction is 95 percent complete
1st Phase:
3
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 million and was fully financed by Tuwairqi Holding, including 65 percent through debt. We should ask ourselves, what is DRI? DRI is one of the most preferred raw materials for quality steel making, globally. There is a consistent growth in the production of DRI over the years, owing to environment-friendly production processes and consistent quality of the product. Foundries and melt shops in Pakistan have not yet fully realized the benefit of using DRI. Actually, DRI contains around 94 percent iron with very little impurities, which are removable. As compared with the conventional steel making processes, using DRI gives a very good control 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 Malaysian 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 investment of USD 380 million and German technology. The firm is also looking at opportunities for iron ore exploration in Pakistan's Baluchistan and Punjab provinces 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 steel is around 8.4 million tonnes, while production is 4.9 million tonnes per year. Additionally TSML possess plans to export 50 percent of our production to India and the Middle East. Pakistans economy and industry in general is being hindered by power shortages, which are proving to be life-threatening for the very existence 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 overcome 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 only 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. It will open up new avenues of investment in similar plants besides 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 3,500 indirect job opportunities. Pakistan is among those countries that rely mostly on imports, when it comes to heavy mechanical structures and engineering goods. By producing high-quality steel within Pakistan, we can manufacture such equipment locally by value addition, with the help of downstream industries.
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 only reaches 5m tonnes. An increasing growth in the country's automobile and construction industries, as well as, large scale hydra-power projects dam construction, has contributed to the increase demand in steel. According to 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 speaks volumes of a huge potential of investment and growth opportunity in the steel sector of Pakistan. 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. The current scenario of Pakistani steel sector indicates a huge growth potential in this industry. The per capita-consumption of steel in Pakistan is only 38 kg vis a vis a global average of 175 kg. Even if we consider the very modest increase in per capita steel consumption to 80 Kg in next 10 years, the steel requirement works out to be 16 million 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 investors and analysts insist that Pakistan is evidently a multi-billion dollar market, an for this goal to achieve it needs a number of quality steel manufacturing projects so that it does not only become self-reliant in steel sector but also can enhance its share in global engineering arena. As a step towards the above mentioned vision, Tuwairqi Steel Mills has established a Technology Centre and Applied Research Centre for human resource development.
Aluminum 87.8 wrought & worked All others 373.4 metals & artifacts
In view of the present scenario in the steel sector, Pakistan's government has formulated a National Steel Policy. The policy aims at bridging the demand-supply deficit in the country by increasing domestic steel production capacity to 15 million tons per year by 2020. This augmentation in production capacity can sufficiently be sufficed through ample domestic iron-ore deposits. Pakistan has proven iron ore reserves of about 1.42 billion tons. The country's primary deposits are located in North West Frontier Province, Baluchistan and Punjab. These regions 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 tons of reserves, contains 30 percent-35 percent of iron. The new steel policy also 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 infrastructure to attract foreign and private sector investors to set up manufacturing facilities. Pakistan's first private sector steel plant is being developed in Bin Qasim by Al-Tuwairqi Holding (Dammam, Saudi Arabia) at an investment of $300 million.
Manzoor Ahmed Wattoo, Pakistan's Minister of Industry and Production, recently said the government is proposing to fix the prices of local steel products manufactured by state-controlled Pakistan Steel Mills Corporation Limited (Karachi, Pakistan) to be on par with international market standards. The proposal aims to not only integrate the steel industry in the country but also evolving a transparent, open system of operations.
Auxiliary Industries
The steel industry is considered the mother industry of all industries, particularly the engineering industry.
Cold Rolled Sheets Enameled ware Bicycle Steel fabrication Drums Barrels Jerry-cans Steel furniture Machinery Vehicle and bus bodies Steel containersteel container
Galvanized Sheets Containers Ducting equipment Water heaters Steel shuttering Desert 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
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 utilize outdated hearth process, and Pakistan has yet to modernize its steelmaking processes considerably. Labor productivity in Pakistan is very low. Steel production in Pakistan is hampered through power shortages, and this hindrance is less likely to be resolved in the near future.
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 for enterprising investors. The Engineering and Development Board (EDB) of the ministry of industries and production has evolved the long term National Steel Policy with a view to cover the widening demand and supply gap by achieving a production target of 15 million tonness of steel by 2020. Pakistan to shift its focus from textile & agriculture to heavy industries. ( heavy industries 60 % of world trade) vision 2030. Setting up of high tech plants ( Tuwairqi Steel Mill ). Transfer of technology and enhancing quality of manpower through setting up six engineering universities.
Threats:
Slow growth in infrastructure development. Possibilities of export growth from China. 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. Lack of professionalism (implementation of technology).
1)
Infrastructure:
The machinery of Pakistan Steel has become old and it needs renovation and improvement. Moreover, it the machinery is being run badly in the past years.
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 different 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 materials of steel industry include steel scrap, fluxes, Ferro alloys and coke, whereas steel scrap is used in abundance in comparison with other constituents. About 1,000,000 ton steel scrap in total, inclusive of 400,000 ton scrap imported from countries like Middle East, South Africa, Australia, and Europe, is consumed annually in Pakistan for melting. MS billets, steel ingots and other steel scrap 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 huge freight charges. Other major countries are South Africa, South America and Europe. 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 of 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 maintaining good health.
4) Technology
Innovative process technologies that reduce emissions and wastes (sludges, dusts, CO2) are not implemented. Advanced recycling solutions that convert wastes into valuable products are also not available There is a paradigm shift in the world steel industries where companies are becoming less and less technology-oriented 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 highervalue steel grades through innovative product development is an important step for maintaining and expanding existing markets, as well as for securing niche markets. Pakistan, however, has been unable to inculcate this shift in its local industry. There is a lack of management skills and information systems in the industry which if implemented can drastically reduce the cost of production. This cost reduction can be realized through an improvement of business processes (investment strategy, organizational aspects, flexible and just-in-time supply, etc.), partnerships with suppliers and service partners, as well as by the permanent optimization of production routes, equipment and logistics. Failing state of Coke Oven Batteries which need immediate reconstruction to produce Coke urgently needed for survival of Blast Furnaces, as well as Billet Mills which is dependent on Coke Oven By-Product gases Coke-Oven Batteries, Hot Strip Mill and Steel Making Department remained totally ignored because of financial crunch and non-professional approach with which the mill was being run.
5) Utilities:
Electricity: Electricity is the main, most expensive and most consumed utility in 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: Major common water uses include the following: o Make-up water for furnace coil water-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 ladle. Gas is utilized, also, to meet some of the household requirements in the factory as well as in the residential accommodations, if located within the premises of the industrial unit. Hundreds of steel re-rolling and re-melting mills in Pakistan 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 hit by the non-availability 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 Pakistan Steel. The small re-melting mills are facing a similar 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 prices of ship scrap 2. High import duty 3. Excessive taxation
The idling of the ship-breaking industry have forced the steel re-rolling and remelting mills, particularly the big ones, to replace comparatively less costly ship 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 demand. 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 operation of the induction furnace produces metal dusts, slag and gaseous emissions. 12 Kg of particulate matter is produced per ton of product (at the
Focused research and development activities in collaboration with foreign experts. Financial needs to be addressed by the banks. Management of Mineral Resources. Beneficiation of low grade Indigenous Iron ore. Promote private public partnership in Steel sector.
Ship breaking and Scrap Industries form a crucial component of the Pakistani Steel Industry. Without briefly touching upon the above mentioned industries would be to formulate an incomplete report. The remaining part of the report briefly discusses the Ship Breaking and Scrap Industries, which majorly provide the basic raw material for the Pakistani Steel Industry. The ship breaking industry in Pakistan, 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 breaking purposes with more than 100 companies operating in the country. Gaddani ship breaking industry was considered as the largest and the best ship breaking centre 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 the ship building industry reached its zenith, leaving many other international ship breaking industries far behind in terms of the total number of ships being broken down and the tonnage of ship scrap being handled. It is estimated that during these flourishing days, this industry contributed Rs5.3 billion to the national 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 breaking industry in the 90's, it started to decline. After the Pakistan ship breaking industry came to a standstill in the 1990s, India and Bangladesh became the pioneers of the ship breaking industry in the world. Most of the foreign clients turned to them in this hour of critical crisis. Today both countries are prospering 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 best to reposition itself. In India, the annual ship breaking figure has reached the level of above 3 million tonness followed by Bangladesh with 1.5 million tonness. Hundreds of steel re-rolling and re-melting mills in Pakistan 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 hit by the non-availability 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 Pakistan Steel. The nonavailability of raw material, ship plate, has forced the existing re-rolling mills to switchover to iron billet from the Pakistan Steel. This 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 increase. That explains the closure of tens of steel rerolling mills in Karachi during last many years. A ray of hope emerged for the industry owing to global recession 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 community of ship-breakers that over a thousand vessels could be scrapped during 2009 alone.
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 demand for regional steel scraps have plummeted seriously. This can have a negative impact on its economy. The possibilities of large scale job loss and unemployment looms large over the ship breaking industry of the country. To further aggravate 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 sharp 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 dollar, which values around 70 rupees in India and 68 taka in Bangladesh, is worth around 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 the 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 the 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 which keeps the demand for steel almost always high. Bangladesh doesnt have an industrial base anywhere as massive as Indias, but it has one of the lowest labor rates in the world which is said to be less than half of what it is in Pakistan. Interestingly 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 wage set by the government. In Bangladesh, you would get the same amount of work done for 3,000-3,500 takas. The difference, as you can see, is huge. Which, incidentally is good for the people but not for the industry. The overall cost of doing 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 entirely dependent on it for making its giant mechanical cutters functional.
FUTURE PROSPECTS
According to the Geological survey of Pakistan, Kalabagh (Mianwali district) holds substantial iron ore reserves at an approximate 9,300 million tons. Given this, the idea of constructing the second largest steel mill at Kalabagh was explored by the Musharraf regime in 2004.
Local raw material procurement would be a blessing to the countrys national exchequer and those who painstakingly import raw materials from countries such as India, Iran and Turkey.
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 the world's most advanced DRI (Direct Reduction of Iron) technology. Currently it has been 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 replace 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 steel making, it will also be helpful in giving impetus to the industrial progress in Pakistan. It will open up new avenues of investment in similar plants besides 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 3,500 indirect job opportunities.
BIBLIOGRAPHY
http://www.nationsencyclopedia.com/Asia-and-Oceania/PakistanINDUSTRY.html#ixzz0sn556kfD http://www.arabianbusiness.com/591597-weak-gulf-steel-demand-couldlead-to-oversupply http://steel.pk/ http://tribune.com.pk/story/13721/steel-industry-beset-with-problemsdespite-bright-prospects/ http://steelguru.com/interview/detail/132/Making_Pakistan_steel_sector_str ong.html http://www.onepakistan.com/finance/news/pakistan-business-generalnews/4198-Year-end-review.html http://www.fandmmag.com/web/online/Industry-News/Pakistan-Proposesto-Link-Domestic-Steel-Prices-with-International-Market-Rates/1$3435 http://scrapnews.recycleinme.com/newsdetails-20.aspx http://steeltimesint.com/news/view/pakistan-has-the-potential-to-increaseits-steel-production-to-16mt-y http://rupeenews.com/2008/06/12/the-2nd-major-steel-mill-for-pakistan/