By Muhammad Zulqarnain

Pakistan can revive its struggling steel industry through long-term industrial planning, technological modernization, and stronger policy support, with experts saying China's experience offers valuable lessons for achieving sustainable growth and improving global competitiveness.

Pakistan's steel sector continues to operate well below its potential. According to the World Steel Association, the country's per capita steel consumption stands at just 35 kilograms and it contributes only 0.27% to global steel production. In comparison, China accounts for 53% of global steel output and recorded per capita steel consumption of 691 kilograms in 2021.

Experts believe Pakistan's steel industry already possesses significant production capacity, but inconsistent industrial policies, weak domestic demand, and high production costs continue to constrain its growth. They say China's long-term industrial planning provides a practical roadmap for revitalizing the sector while strengthening Pakistan's position in regional industrial value chains.

Speaking with Wealth Pakistan, Syed Wajid Bukhari, Secretary General of the Pakistan Association of Large Steel Producers (PALSP), said steel serves as the backbone of an economy by promoting self-reliance, industrial efficiency, and global competitiveness.

Drawing lessons from China, he said the country's remarkable rise in steel production was the result of long-term planning and consistent policy implementation. He highlighted the role of China's National Development and Reform Commission (NDRC), which guided industrial development through a comprehensive reform agenda.

Referring to China's steel-sector reforms, he said the country had phased out inefficient production capacity as part of its industrial policy introduced in 2005.

The strategy helped transform China into the world's largest steel producer. Today, its steel production capacity stands at approximately one billion tonnes, while Pakistan has witnessed the closure of nearly half of its steel production capacity, largely due to a lack of strategic planning, he added.

Bukhari noted that China's steel success has been driven by strong domestic demand from the construction sector and large-scale infrastructure projects. Coupled with an export-oriented strategy, these factors have enabled China to export nearly 120 million tonnes of steel annually.

"It is a Chinese miracle," he remarked, adding that Beijing's methodical approach—characterized by government facilitation, robust domestic competition, export incentives, and continuous investment in development projects—enabled the country to become the world's largest steel producer.

He pointed out that China has recently reduced incentives for low-value-added steel exports to encourage the production and export of higher-value-added and environmentally sustainable steel products.

Commenting on Pakistan's steel industry, he said policy support remains uneven, with some sectors receiving greater incentives than others. He noted that over the past decade, major players in Pakistan's long steel industry have installed state-of-the-art technologies and significantly expanded production capacity.

"However, due to weak domestic demand, the industry is currently operating at only 40% to 50% of its capacity," he said.

Separately, Zarak Khan, Chief Executive Officer of FF STEEL, said Pakistan's primary challenge is not a lack of technology or manufacturing capacity but an unfavourable business environment and subdued domestic demand.

He noted that electricity accounts for approximately 23% to 25% of steel production costs in Pakistan, compared with around 12% in China, significantly undermining the competitiveness of Pakistani manufacturers.

"Pakistan already possesses substantial installed steelmaking capacity, much of which remains underutilized. Given current exchange rates and international equipment prices, establishing new steel plants is difficult to justify economically," he said.

According to him, the slowdown in construction activity since 2022, coupled with reduced Public Sector Development Programme (PSDP) spending and the completion of major CPEC-related projects, has led to a sharp decline in steel consumption across the country.

He emphasized that future collaboration with Chinese firms should focus less on establishing new primary steelmaking facilities and more on technology transfer, equipment modernization, specialized steel products, research and development, and workforce training.

He said one of the most important lessons Pakistan can learn from China is the strategic integration of industrial and energy policies.

"China has effectively used its steel industry as a strategic consumer of electricity by offering competitive tariffs during periods of excess generation. Pakistan, which also faces significant underutilized power generation capacity, particularly in winter, can adopt a similar approach," he said.

He proposed the introduction of a targeted winter electricity tariff for export-oriented steel production, with concessions linked exclusively to verified export proceeds.

"Instead of allowing idle generation capacity to go unused, Pakistan can effectively export electricity embedded in value-added steel products. Such a policy would increase industrial output, generate foreign exchange earnings, create jobs, and improve the utilization of existing power infrastructure," he added.

Credit: INP-WealthPk