Pakistan’s Ministry of Commerce has completed a comprehensive report on Pakistan's iron and steel sector, recommending significant tariff reforms to enhance domestic production and unlock export potential.
The study, conducted by the National Tariff Commission (NTC), was commissioned after the Economic Coordination Committee (ECC) extended regulatory duties on finished flat steel products until March 31, 2025, in January this year. The report addresses critical challenges facing the industry, including underutilized production capacity, rising imports, and an inefficient tariff structure.
Industry struggles continue
Despite significant installed capacity, Pakistan's steel sector has shown an inconsistent performance. Long steel production capacity grew from 7 million mt in the financial year 2022-23 to 8 million mt in financial year 2024-25, but actual production dropped to 3.5 million mt in the financial year 2023-24 before recovering to 5.4 million metric tons this fiscal year. Flat steel products also demonstrated low capacity utilization.
The report highlighted that, while billets and steel bars enjoy high tariff protection with effective protection rates reaching 123.11 percent, this has inflated costs for end-users and downstream industries, limiting export competitiveness in construction, manufacturing, and infrastructure sectors.
Key reform proposals
To address these challenges, the ministry has recommended reducing duties on basic raw materials - including iron ore, scrap, and direct reduced iron - to zero percent to lower production costs. For finished products like rebars and wire rods, which currently face tariff burdens of 23-56 percent, the ministry proposes removing Additional Customs Duties and reducing Regulatory Duties to a maximum of 10 percent over three years.
For flat steel products, no changes are recommended as their tariff structure is already competitive. Hot rolled coils, not produced domestically, would receive zero percent duty to support downstream manufacturers.
Export potential recognized
The report noted positive trends in flat steel exports, with Pakistan shipping $363 million worth of cold rolled coils, galvanized, and coated sheets to markets including the United States and Canada, demonstrating the sector's export potential under favorable policies.