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Pakistan Steel Sector Warns of Business Closure: An In-Depth Look

The steel sector is the backbone of the economy as it plays a pivotal role in various industries such as construction, transportation, infrastructure, and manufacturing, providing employment to thousands of workers and contributing to growth and development. In Pakistan, the significance of steel accounts for one of the major contributors to the economy, accounting for 5% of the GDP. Steel's significance as a fundamental component of infrastructure and economic development cannot be overstated, and it is likely to continue shaping modern societies. However, in recent years, the sector has been facing significant challenges that are threatening its survival.

Taking into account the data from the last five years, the steel industry in Pakistan has experienced growth in both import and demand. According to data from the Pakistan Bureau of Statistics, the country's steel imports increased from $1.02 billion in 2016-17 to $1.5 billion in 2019-20, a 47% increase (Sbp,2022). Meanwhile, steel demand in Pakistan has also grown, with the country's crude steel production increasing from 3.6 million metric tons in 2016 to 5.7 million metric tons in 2019, a 58% increase (Sbp, 2022). However, the COVID-19 pandemic has impacted the steel industry globally and in Pakistan, resulting in a decrease in demand and production in 2020 (Sbp, 2022). Despite this, the outlook for the steel industry in Pakistan remains positive due to ongoing development projects and increasing demand from various sectors, particularly those under the China-Pakistan Economic Corridor (CPEC) and the government's construction package. CPEC is a massive infrastructure and economic development project that includes various energy, transport, and communication projects. In addition to CPEC, the government's construction package, launched in April 2020, has also provided a much-needed boost to the steel industry. The package aims to stimulate economic activity and create jobs by allocating funds for various construction projects across the country.

According to the Pakistan Bureau of Statistics, the country's steel production reached 5.2 million tons in the fiscal year 2020-21, which is a 14.6% increase from the previous year (Sbp, 2022). The demand for steel products in Pakistan is primarily driven by infrastructure development, construction projects, and industrial growth (Tribune, 2023). In Pakistan, the steel rate has declined by 17% due to many industries closing down, but it is still one of the top producers and is currently ranked 6th in steel production (Tribune, 2023).

However, considering the current scenarios of the steel sector, it will be no wrong to say that the steel manufacturing industry in Pakistan is facing several challenges that are hindering its ability to produce and meet the demand for steel. Below are some of the major concerns faced by the sector:

Rising production costs and declining demand: The major steel sector giants have warned of business closure due to increasing production costs and declining demand. According to the Pakistan Bureau of Statistics, production costs have risen by over 50% in the past three years, while demand for steel has declined by 20% (Tribune, 2023). This has resulted in a financial crisis for key steel mills in the country, making it difficult for them to continue operations.

Data from the Ministry of Industries and Production reveals that Pakistan's steel production capacity has decreased from 5.5 million tons in 2013 to 4.7 million tons in 2020 (Sbp, 2022). This decline in production capacity has contributed to a shortage of steel in the market, leading to increased prices for consumers and a decline in demand (Sbp, 2022).

Dollar Fluctuation impact: The price hike of the dollar has decreased the value of the rupee resulting in the costs of Raw Material Skyrocketing. According to the experts, the downward slide of the rupee against the dollar has led steel manufacturers to raise the prices of steel per ton up to 325,000/-, making steel products unaffordable for many consumers (Sarfraz, 2023).

Super Tax and Interest Rate Hike: To trim the deficit, the Government has recently introduced a 10% Super Tax on Steel industries of Pakistan putting an unbearable strain on the steel business (Business Standard, 2023). The major steel industry giants are urging about the cost of borrowing being too high leading to the collapse of many key players.

Shortage of Raw Materials and Scrap Prices Skyrocketing: Pakistan has been experiencing a shortage of steel raw materials. This has led to higher prices and decreased production in the steel industry, which is a crucial sector of the country's economy. The shortage of raw materials has also had an impact on related industries such as construction and infrastructure development (Sarfraz, 2023). The government should work to mitigate the effects of the shortage of raw materials by opening the LCs within a definite timeframe.

Imported Raw Material and Letter of Credits Closure: The closure of LCs in Pakistan has caused a shortage of imported scrap, leading to a spike in local scrap prices. This has increased production costs for steel manufacturers and resulted in higher prices for steel products. According to an estimate, around 7.5 million jobs are at stake because of the threat of steel industry closure which will also result in the closure of all construction allied industries such as grey structures (Sarfraz, 2023).

Local Scrap Availability and Quality: Local scrap in Pakistan may have limited availability, poor quality, a lack of standardization, and inconsistent supply. These factors can make it less competitive and less attractive to buyers, compared to scrap materials that are imported from other countries. Apart from that, the local scrap available does not meet the quality of steel products according to International Standards.

Impact on employment and the economy: The decline in the steel sector is not only affecting steel mills but also their employees and the wider economy. According to the All-Pakistan Labor Federation, over 10,000 workers in the steel sector lost their jobs in the previous year (Release, 2023). This has had a devastating impact on the country's economy, as workers are unable to contribute to economic growth and development. Also, the collapse of small players and some big players in the construction sector has impacted adversely to the GDP in terms of taxes and employment ratio (Release, 2023). Currently, employing over 200,000 people across Pakistan directly and indirectly, the steel sector is going to crunch the employment rate to a devastating level, which could spell trouble for those who depend on these jobs to make ends meet (Sarfraz, 2023).


The steel industry plays a significant role in the economic growth and development of Pakistan. It is a key contributor to employment and international trade, providing raw materials for various industries and supporting infrastructure development. However, key players in the steel sector of Pakistan are facing a serious crisis that requires immediate attention from the government. The government must take steps to address the challenges faced by the steel industry, including the immediate opening of LCs, reducing raw material costs, ensuring a maximum supply of local scrap, improving the quality of raw material, exempting the steel sector from super tax and work on introducing packages for the survival of steel industry. Failure to take action will result in the closure of many steel mills, a further decline in the country's economy, and the loss of millions of jobs. The government must act now to ensure the survival of the steel sector and secure the future of the country's economy.



 Sarfraz, S. (2023) LCS: Steel Sector says facing a dire situation, Brecorder. Available at:,of%20over%205%20million%20tons. (Accessed: March 31, 2023).

 Industry tables (no date) Industry Tables | Pakistan Bureau of Statistics. Available at: (Accessed: March 31, 2023).

Annual report 2021-22 (no date) State Bank of Pakistan. Available at: (Accessed: March 31, 2023).

Tribune, E. (2023) Steel industry warns of business closure, The Express Tribune. Available at: (Accessed: March 31, 2023).

 Release, P. (2023) Large Steel Producers Express serious concerns over non-opening of LCS, The Nation. The Nation. Available at: (Accessed: March 31, 2023).

 Pakistan Govt slaps 10% super tax on big industries to trim deficit (no date) Super Tax and Interest Rate. Available at: (Accessed: March 31, 2023).