Intermarket Intel - Proposed reduction of RD on Steel
- As per news reports, GoP is mulling to reduce Regulatory duty (RD) on steel products, which includes a wide range of products like rebars and flat products.
- On rebars (produced by ASTL and MUGHAL), existing RD is 30% in addition to an antidumping duty of 19.15% (imposed in Oct’17). Thus the reduction in RD will effectively be an 11% reduction of import duty on rebars. Our initial impression is that the removal of 30% RD on steel rebars will have no impact on ASTL and MUGHAL, because the prices of imported rebars, post devaluation (and no RD), would still remain at a significant premium to local prices. Our preliminary working suggests that, assuming a trading margin of 7%-9%, imported price would still hover around PRs118-122k/ton vs local prices of PRs92-97k/ton. To recall, anti-dumping duty (c.19%) will remain intact on Chinese imports for the next 5yrs.
- However, we feel such a decision could be negative for flat steel producers (CRC produced by ISL and Aisha Steel). The removal of 5% RD on CRC and galvanized products could lead to price reversion of their products. Currently, imported prices are at a small premium of PRs5,000-7,000/ton to local prices of PRs90k/ton on CRC. The removal of 5% RD will reduce this gap to PRs2000/ton, which may cause local producers reverting recent price increase of PRs2000/ton to maintain the discount, in our view. ISL and ASL are already exempted from paying RD of 12.5%. Therefore, we estimate a negative impact of c.7% for ISL, if this decision were to pass.
Amreli Steels Limited is a Pakistan-based steel manufacturing company. The Company is engaged in the manufacture and sale of steel bars and billets. The Company offers a range of steel bars for all construction needs.
International Steels Limited is a producer of flat steel products. The Company manufactures cold rolled steel coils, galvanized coils and color coated steel. Its cold rolled steel is available in thicknesses ranging from 0.25 millimeter (mm) to 3.0 mm; galvanized steel is available in thicknesses of 0.25 mm to 2.0 mm, and color coated steel is available in thickness range of 0.20 to 1.50 mm. Its rolling capacity is 500,000 metric tons (MT). It produces approximately 400,000 MT of galvanized products. It produces color coated sheets on various substrates, including cold rolled, galvanized, galvalume, aluminum and stainless steel sheets. Its cold rolled steel offers applications, such as ceiling lights, tube lights, ceiling fans, oil drums, lube drums and motor cycle frame; galvanized steel has applications, such as packaging, furniture, washing machines, gas ovens and microwave ovens, and color coated steel offers applications, such as ice boxes, tubs, buckets and storage bins.
Mughal Iron & Steel Industries Ltd. Mughal Iron & Steel Industries Limited is engaged in manufacturing and trading of mild steel products. The Company is engaged in producing steel in the long-rolled steel products, which has a capacity of 688,000 metric/tons of re-rolled steel per annum. The Company is engaged in multidimensional activities from making billets of mild steel, spring steel, deformed bar, re-bar, cold twisted rebar and a range of sections, such as I-beams, L-sections, C-section, H-beams and T-bar. The Company offers its products under various categories, including Smelting, such as Ferro Silicomanganese, Ferro Chrome and Ferro Silicon; Billet, such as Mild Carbon Billets, Spring Steels, Austentic Stainless Steel, Ferrite Stainless steels and Alloys Steels; Bars, including Deformed Bars, Re-inforcement Bars and Thermax Bars; Beams, including I Beams (Girders), Angle Section (L Section), T Bar (T section) and C Channel, and Grade and Specifications, including ASTM A 615 G-40 and ASTM A 321.
Intermarket Securities Limited (IMS) is a full service corporate brokerage firm based in Karachi, Pakistan. We service both domestic and international clients. IMS was ranked #2 Best Local Brokerage and #3 Best for Overall Country Research for 2016 by AsiaMoney.
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