Production of Steel billets / ingots increased 44 percent on yearly basis during the month of October 2020, according to the latest data released by the Pakistan Bureau of Statistics (PBS) on Tuesday.
“This is the highest monthly production over the last 25 months,” Ahmed Rauf at Sherman Securities said.
Cumulatively in four months (4MFY21), production growth stood at 30 percent over the same period last year. This trend suggests that there is higher demand for long steel products, as billet is a major intermediary product for manufacturing of rebars, girder and t-iron.
“Our working suggest that risk of capacity overhang is mitigating, as local industry capacity utilisation in October stood around 80 percent,” Rauf said. “Thus, rising capacity utilisation may lend support to local rebar producers in passing on the rising international steel scrap prices.”
Among the listed long players, Agha Steel is ideally placed among its peers, as the company is currently carrying total inventory of around 190 days. Thus, the benefit of low-cost inventory is expected to enhance gross margins of the company for the ongoing quarter.
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