Amreli vying for growth

Amreli Steel has been diligently sending a quarterly report to the PSX on its expansion project to substantially increase its production capacity for steel rebars and billets at both its production sites—Karachi and Dhabeji.

As it stands, billet capacity will be increased from 200,000 to 400,000 tons per year; steel melting capacity for billets will be increased from 400,000 to 600,000 tons per year at Dhabeji; rolling mill capacity for rebars at Dhabeji will be increased from 300,000 to 425,000 tons per year while the same at the Karachi site will go up to 325,000 tons to 180,000 tons per annum. The timeline of the latter may not be very clear, but these expansions are enough to paint an optimistic picture for Amreli over the next few years, even if the company closed off outgoing fiscal year with a drop to its bottom-line.

Revenues rose by 7 percent bolstered by an increase in demand for rebars as prices remained considerably low. The company also benefits from the anti-dumping duty imposed on Chinese steel that was affecting prices for local steelmakers here at home and pinching a chunk of their market share. However, margins squeezed in the outgoing fiscal year. The company makes its own billets which comparatively should be keeping cost lower than other steelmakers who import them.

With so much spending going into construction and infrastructure development, steel consumption is expected to substantially go up which is currently 37.5kg per capita against a world average of 224kg. Other than Amreli, other players like ISL are also expanding their capacity and expected to reach high capacity utilization even as they double capacities.

For now, ISL is coming on top by utilizing its capacity to the max and earning a heft growth to its bottom-line; Amreli won’t be left far behind as far as established steelmakers go. It is operating two production facilities near the port and the capacity enhancement for steel rolling and melting will put it in the running for top spot.

Even though, there is enough demand for everyone to get a generous piece of the pie. The curb from Chinese steel imports will remain a strong driver of revenues going forward.

However, if plans for new Chinese steel factories materialize, much of the expected demand coming from CPEC could be directed away from existing steelmakers. We hope to make some estimates for demand dynamics in this column as we hear more about potential new entrants in the industry.