'Materials for CPEC should be sourced locally where capacity is available' - Shahnawaz Ishtiaq

BR Research recently sat down with Shahnawaz Ishtiaq who is the Executive Director of Nawab Brothers Steel Mills (Pvt) Ltd. He is a veteran of the steel industry with over 45 years of experience. Twice he has served as Vice Chairman of SITE Association. He is also a former Vice President of Federation of Pakistan Chamber of Commerce and Industry. He was also elected as Chairman of Pakistan Steel Re-rolling Mill Association three times. He has done BSc from Karachi University.
BR Research: Tell us about Nawab Steel and its current operations.
Shahnawaz Ishtiaq: Nawab Steel's history pre-dates partition as the founding members of the company used to manufacture steel locks in Aligarh, India. After partition my family migrated to Karachi and set up a manufacturing facility for steel locks, ploughs and spades. In 1964, my father setup a rolling mill plant, while Nawab Brother Steel Mills was incorporated in 1981. We are one of the oldest players in this industry.
Nawab Steel was one of the first companies in Pakistan to introduce deformed steel bars which adhered to the international standards. Over the years we have modernized our units and have made sure that our customers get top quality products.
Currently, we have total capacity of about 6,000 tons a year including Ittehad Steel which we also own. We can produce steel bars from 10mm to 40mm. Our products include TMT Bars (G-500) and deformed bars (G-60). We supply steel to some of the top companies, both private and public, in Pakistan.
To ensure that we maintain our quality and reputation, we have two laboratories for quality control. One is mechanical while the other is equipped with a Spectrometer from Belec which helps us in achieving specific quality standards.
BRR: Do you have any plans for expansion?
SI: As you can see most of our competitors are in the process of expanding. To compete we have to increase our capacity as well. We have planned to double our capacity in the near future and have already acquired the land at Port Qasim to do so.
BRR: Where is your major customer base?
SI: Being located in the south region, a good chunk of our customers are from this area. But we also have numerous customers up centre and north. Transportation costs have gone up considerably in the recent past which makes it difficult for us to sell in other parts of the country.
BRR: Is your expansion linked with CPEC?
SI: Yes. CPEC is one of the major reasons for our expansion plan. With the all upcoming projects there is going to be a lot of demand for steel products. I believe that CPEC can change Pakistan's fortune provided that we make full use of this opportunity.
Also demand for housing will only increase in Pakistan. We already have massive shortage of homes and just to fulfil this gap it would takes us a decade, if not more. The corporate sector is also expanding and we can see new projects being announced every week. In light of all this we decided that we needed to increase our capacity.
I would like to add that materials for CPEC should be sourced locally where capacity is available so that local manufacturers are able to operate at full capacity and generate employment.
BRR: How do you think dumping of steel products by China has affected the local market?
SI: China produces more than 50 percent of world's steel. You cannot blame them for dumping their product in the market. They are looking out for their own interest and our country should do the same. Our manufacturing companies have just stood up on their feet, and it would take us time to develop our capacity and increase efficiency. Only after that we can compete on equal footing with global giants. Even developed countries are trying to protect their industries from dumping. Our lawmakers need to look at the bigger picture.
If anti-dumping duties were not imposed, it would have taken local players out of the market. Our traders and importers would have brought in so much steel at lower prices that we would have had one or two years' worth of supply lying around.
BRR: Are you satisfied with the 30 percent RD that has been imposed on imported steel?
SI: This 30 percent includes 15 percent duty on raw material as well. Duty should have been only imposed on finished goods. Only a few mills in Pakistan can produce their own raw materials. RD on raw material would weaken the position of small mill owners and the big players can drive them out of business by lowering prices and eroding their margins.
Another issue we are currently facing is that ITP or price registered with customs officials for billets is very high from the actual import price. The difference is almost 30 percent which adds to our costs significantly. The government should look into all these problems and try to resolve them as soon as possible.
BRR: What is your view on international steel prices in the long run?
SI: Iron and steel prices have had a rough ride over the past one year or so. I think the price would stabilize towards the lower end. Main reason being that China has so much excess capacity right now that it would take years for the market to balance to out.
BRR: Has the new real estate tax affected your business?
SI: The new tax on real estate transactions has slow down construction activities as builders, investors and final buyers are waiting on the side lines for more clarity. Our sales have also taken a hit because of this hiatus. We hope that situation would improve soon and normal business resumes. If prolonged, then all construction related industries would be feeling the pinch.