3 min read
The Competition Commission of Pakistan (CCP) has urged a major overhaul of Pakistan’s steel sector in its newly released “Competition Assessment Study of the Steel Sector in Pakistan,” highlighting deep structural, regulatory, and competition-related challenges that continue to hinder industry growth and long-term sustainability. The study underscores the absence of a national steel policy and recommends the establishment of a dedicated Steel Ministry, citing successful models from China and India.
Pakistan’s manufacturing sector has remained a cornerstone of economic expansion, contributing 71 percent of total exports and employing about 15 percent of the workforce. Within this sector, the steel industry plays a vital role. The report examines the sector from a competition perspective. Large Scale Manufacturing (LSM) dominates the industry, accounting for more than 69 percent of manufacturing and 8.2 percent of GDP. In FY24, local steel production reached 8.4 million MT, including 4.9 million MT of long steel (billets and ingots) and 3.5 million MT of flat steel (coils and plates). Steel scrap imports stood at 2.7 million MT, underscoring the industry’s reliance on imported raw materials. Despite this, per capita steel consumption remains low at 47 kilograms, reflecting limited industrial activity and slow infrastructure development.
Demand is driven by infrastructure development, urbanization, industrial growth, and major projects such as CPEC, with construction and real estate as key consumers. On the supply side, the industry faces heavy import dependence, energy constraints, and limited availability of local raw materials.
Pakistan Steel Mills (PSM), once a strategic asset with an annual capacity of 1.1 million tons, has been non-operational since 2015 due to financial losses and outdated technology, leaving liabilities of Rs400 billion. By contrast, international peers such as China, India, and Russia advanced through government support, innovation, and strategic investment. Lessons from global players highlight the need for Pakistan to develop local coal and iron ore, modernize infrastructure, and adopt sustainable, energy-efficient technologies.
CCP Report Recommends a Comprehensive Framework
- Develop a national steel policy, rationalize taxes, ensure stable SROs, and support anti-dumping protections.
- Expand CoEDB to include industry experts and CCP representation, strengthen the Ministries of Industries and Commerce, and accelerate NTC processes.
- Enforce quality standards, formalize undocumented units, and eliminate distortions from ex-FATA/PATA exemptions.
- Encourage Direct Reduced Iron (DRI) technology, incentivize iron ore mining and value addition, and promote green technologies.
Regulatory and institutional inefficiencies further compound challenges. The Ease of Doing Business Committee lacks industry-specific expertise, while frequent changes in SROs create uncertainty for businesses. Substandard steel accounts for 50 to 60 percent of domestic production due to weak enforcement, disadvantaging compliant producers. Tax exemptions in ex-FATA/PATA distort competition, with 1.5 million tons of untaxed steel entering settled areas annually and causing Rs40 billion in revenue losses.
The sector also suffers from market concentration, policy biases, and limited diversification into high-value-added products. High entry barriers, the dominance of undocumented units, and minimal R&D investment restrict competitiveness. Import dependence on scrap further exposes the industry to global shocks, while weak compliance erodes consumer trust and compromises safety.
