Mr Khurram Javaid is chief executive officer and director at Mughal Iron & Steel Industries Ltd, one of Pakistan’s largest steel producers at 1.1 million tonnes (mt) and also one of the largest steel scrap importers.
As the south Asian nation looks at double-digit growth in steel demand owing to infrastructure development, Mughal Steel, a listed company, prepares for its own growth in line with it. One of the key people driving the change is Mr Javaid, who has made substantial contributions to the company’s production and sales and is looking to usher in new technology into the business.
Mr Javaid holds an MBA degree from the Coventry University, UK and a BSc degree from the Lahore School of Economics in Pakistan. He has his hands busy at human resources planning, policymaking and training. Following are excerpts from a telephonic interview with Ruchira Singh:
1) What is driving the demand for steel in Pakistan and how much will it grow by this year?
The heightened demand is led by various infrastructure projects coming up particularly coal based power projects and dams. Also, the CPEC (China-Pakistan Economic Corridor) that will be done in the next three years, and the Silk Road (proposed road project between Gwadar in Pakistan to Kashgar in the Chinese region of Xinjiang) will contribute to it.
Demand is expected to grow by 25%-30% year on year. The products in demand are mainly rebars in long rolled segment. Hence, current per capita consumption from 30-32kg against world average about 210kg is expected to reach 40kg in coming year unleashing a growth not experienced in the steel sector of Pakistan.
2) What are the policy changes that are helping demand grow?
Recently an anti-dumping duty of 24.4% on Chinese origin steel billets was imposed, encouraging an enabling environment for CAPEX in Pakistan. Earlier this year similar duties were imposed on Chinese imports of finished steels. All this is encouraging local steel capacities to come up. The government is vigilant on putting tariff as well as non-tariff barriers to help guard against imported materials. Power is also now available 24 hours so steel units are better equipped to step up production. Electricity prices were hiked some years ago and at present there is no issue regarding prices.
3) What are the latest trends amongst consumers?
Other than the growth in infrastructure, in Pakistan, the retail market is opening up. There are 200 million people who breathe, commemorate marriages and grow families, so the market will grow. Just like in India, where there has to be construction of multi-storied buildings to accommodate people, so in Pakistan, buildings have to go multi-storied. Therefore, there is demand and it is for good grades of steel. Our region is prone to seismic activity, so there is an additional pressure to make the steel products very strong as well as elastic; this is fully enforced by government departments to ensure quality compliance.
4) How fast are new capacities being added by the iron and steel industry to process larger imports of scrap? Is there enough funding available for this?
As shared, envisioning market expansion, the government‘s pledge to help facilitate capital investments, regulatory measures to help stabilize local industry, inflow from international market on infrastructual projects, local industry is quite responsive and adaptive to the changes.
World’s largest industry players such as Primetals , NCO, Daneillie, Mitsui etc have already bagged good business recently in long and flat rolled industries, followed only by melting and smelting upstream business. With regards to funding, number of opportunities are available now in Pakistan including ECAs (Export Credit Agency), Supplier’s credit, Exim financing along with local muscle from Pakistan banking system, which ineed is quite active as well.
5) Now that China is selling scrap in a big way, how is the scrap market looking this year?
Especially for you, does it mean you can import scrap at a lower price due to proximity with China? Scrap has been coming to Pakistan from the US and Australia, Europe and Middle East any part of the world with special focus on US and Australia.Europe currently caters better to the Turkish demand. Scrap steel prices are currently at $300-$310/tonne including freight. Yes, we are now receiving better prices from China, in the range of $285-$295/tonne. So yes, things are going to see some change.
6) What are the expansion plans of Mughal Iron & Steel?
We have about a million tonne (mt) steel rerolling capacity coming online next year as we have plans to build another plant in the south. This is to be strategically located in the port city of Karachi. We are working to emerge as a vertically integrated steel company with a focus on downstream as well as upstream supply chain including captive coal based power generation, setting up a new fully automated CCM plant, BMR on other section mills capacities.
7) Will the new unit also be a steel melting unit or are you looking at having a blast furnace?
This yet has to come from our business development unit, who are convinced principally about developing smelting capacity via blast furnace route at the port city where import of raw materials and other utilities are better managed. Here, we will be able to make steel competitively, and in a more efficient manner. In Pakistan, we have iron ore available, and we have coal available –lots of it.
This may be looked at as a historic achievement from a private sector company venturing into the blast furnace route on the footsteps of the public sector company Pakistan Steel Mills in Karachi. Unfortunately, Pakistan Steel Mills is currently inoperative. But as I said, it is being studied and in case a blast furnace is not workable, we will build another steel melting plant at the place.
8) Would it be easy to get an iron ore mine allocated for this?
We are in discussions with the government for this and I see no challenges with an indigenous reserve of about a billion ton of proven reserves with no other demand at least for now.
9) In case you decide to build a blast furnace, will it be in a joint venture?
We will need a technology partner. We will look for a European technology partner.
10) If there was no geo-political tension between India and Pakistan, could there have been synergies between the two in the iron and steel trade? How?
This is hard to make a hypothesis, though looking at major markets say US — a 53 state unification, Europe – spreading across about 30 nations, what could be the challenges for India and Pakistan which historically has always been there? India, a consumer market bigger than even China itself -what challenges and opportunities it may bring needs an answer that would come from some deeper analysis.