Pakistan’s Aisha Steel Mills Limited (ASML) has put on hold its decision to invest fresh equity of up to $70 million until there is greater clarity on the new government’s national steel policy, according to ASML CEO Kashif Shah.
ASML is a joint venture between Arif Habib Group, Metal One Corporation; Japan (a subsidiary of Mitsubishi Group) and Universal Metal Corporation of Japan.
“All three partners of ASML are eager to invest another $50–70 million to expand its steel production by 50–60%. However, SRO 565 of 2009/10 is the biggest hurdle in the way of fresh investments,” said Shah, adding that the joint venture will make a final decision on the matter once the incoming government unveils its policies for the steel sector.
Listed at Karachi Stock Exchange,ASML produces cold rolled coil (CRC), which is used to make flat steel objects with the help of pressing machines. “Just take a small piece of CRC, press it down with the help of a machine and you get a Pepsi can,” said Shah.
He went on to add that CRC is a material that is not damaged during moulding, pressing and folding. In Pakistan, it is being used to make body parts of cars, tractors, motorcycles and home appliances such as washing machines and microwave ovens.
ASML currently has a market share of approximately 30% with an installed capacity of 220,000 per annum. Pakistan Steel Mills and International Steel Mills are two others manufacturers of CRC in the country. They, respectively, produce 100,000 tonnes and 250,000–300,000 tonnes. The
demand of CRC stands at approximately 600,000 tonnes in Pakistan, Shah added.
Shah went on to explain that the investment by ASML could make Pakistan an exporting country of CRC. However, he said, the new government would have to provide a level playing field to all players by doing away with the SRO to make this ‘dream’ a reality. The SRO empowers importers to under-declare goods, under-invoice and evade taxes. Shah said such practices allow importers to sell CRC at a 26% discount, compared to local manufacturers, as they evade 16% in sales tax and 10% in custom duties.
“The SRO was introduced at a time when CRC was not being manufactured in Pakistan. Now there are three strong manufactures of the material in the country and SRO 565 of 2009/10 should be withdrawn by the government,” he added.
Furthermore, the ASML CEO revealed that importers were also importing alloy steel under the name of CRC. “There is zero duty on import of alloy steel, compared to 10% on CRC,” said Shah, adding that the price of alloy steel stands at approximately $1,500 per tonne, compared to about $600 tonne for CRC.
In a move to protect the local industry, Shah also demanded the new government to delist CRC from the list of products that are being imported from China at a reduced rate of duty under the Free Trade Agreement between the two countries. “The government should impose a 10% duty on import of CRC from China instead of the current 5% duty.”