1. The current government has now been in power for over eight months. How do you see Pakistan evolving under the PTI government?
The current government from our perspective is a continuation journey on a democratic process, it is the third government that has come in through democracy. Governance has been a major issue in this country, they have come in with a clearly defined agenda, which is to improve governance.
They have also expressed the desire to improve relations with the neighbors and the rest of the world and you can see some visible signs of that happening in terms of our relation with the United States. I believe, we will also be getting along better with India after the elections. The fundamentals of this country are very strong; it is a country of over 200 million people, 50% of which is below the age of 20, we have a very large consumer base. We have a fairly significant middle class (60-65 million people) and they are the consumers and drivers of the economy. We have seen that in the steel sector and more specifically in our sector which is cold rolled and galvanized; the products that are largely used in construction, automobiles, bikes, four wheelers and trucks, have been significantly growing in the last 5-6 years. If you look at steel, it has literally grown by double digits in the last 5 years. We started off in 2011 with a capacity of 250,000 tons per annum, today within a decade we have hit one million tons of both cold-rolled and galvanized production. 10% of our product is exported, the biggest export market that we have got today is the United States. 50% of our exports have found their way into the US, followed by South Africa, the Middle East, Sri Lanka, Canada and some of the South Asian countries. The largest growth sector which we believe will continue to expand in the future will be the automobile sector, there are a number of new players who are entering the market. Kia, Hyundai, Renault and Nissan will be coming in and players such as Suzuki are expanding. They are all potential customers and we see that the growth pattern will continue in the coming years.
2. Why is most of your export going to the United States?
The US is the biggest market and we have had some advantages in commercializing our products there because it has imposed duties, tariffs and anti-dumping duties on imports from China, the US has opened up the market for the rest of the world. China produces half of the world’s steel which makes around 800 Billion tons. No one in the world can compete against China with the kind of scale they have. Japan is the second biggest producer and India stands third at around 100 Million tons. With the export duties, the US market opened up to the rest of the world and we found a way into the market. Our exports compared to the global imports of steel into the US is still very small because we are largely focused on the domestic market. Our domestic market’s demand is so much that the exportable surplus is very limited. The dynamics of Pakistan are such that even though there has been a recent slowdown in the economy, it is just short-term and it will recover immediately.
3. The steel manufacture has endured a boom due to the China-Pakistan economic
corridor (CPEC). Do you get a lot of business from CPEC?
We do not get any business from CPEC’s projects because we are a flat steel manufacturer, our products are used for consumer goods such as air-conditioners or automobiles. This sector will continue growing due to the rising middle-class. Another critical factor is our young population, more people will get into the workforce increasing the housing requirements and need for appliances. Another area where I believe there will be significant growth opportunities is exclusive economic zones that will be installed with the growth of CPEC. There are 9 such zones at present and we believe that our product will very much be used by manufacturing companies present in these zones.
4. International Steels Limited “ISL” is the largest flat steel manufacturer in Pakistan. The company was incorporated in 2007 and commenced production in 2010. To date, the company has invested approximated US$ 250 million in establishing a state-of-the-art flat steel complex. What are your objectives for 2019 and 2020?
We just commissioned our new facility so our primary objective is to consolidate our position. We have further investments in the pipelines that will materialise next year. We are looking at some new investments and projects, in order to move from a commodity to a product. We are thinking of setting up service centers across the country to provide additional services to the customers as well as efficient solutions to the overall industry. Our raw material is currently imported and we would like to produce it locally to reduce our foreign exchange outlay and create a value chain within the country. Last year alone, we invested over US$ 60 Million in a new plant and equipment. As a developing country, we have a bigger opportunity in steel because per capita steel consumption in Pakistan is amongst the lowest in the world at 42kg per person, the global average is about 250 kg per person. With a rising population and the government emphasis on local manufacturing, growth will be inevitable in this sector.
5. This expansion will allow ISL to produce a greater amount of zinc coated or galvanised sheets which are further up the steel value chain. Do you have any diversification plans?
Today we produce cold rolled, galvanized and what we call colour-coated steel products. With the set up of service centres, we will be able to size and shape steel the way the customer wants it. We are evaluating further opportunities for the business, for instance, we are looking at pre- engineered buildings. They may not have a material cost difference compared to conventional construction but the speed of construction will be reduced to 2-3 months compared to the standard 6 months.
6. You are collaborating with AkzoNobel Pakistan to transfer technologies to Pakistan. Are you looking for further potential partnerships?
AkzoNobel provides us with colour that we use in our colour-coated products. The business has grown so rapidly that they have set up a facility for us in Lahore. Instead of importing color, we are now producing it domestically. We have a collaboration with Sumitomo Corporation and JFE Steel Corporation, which is the second largest steel producer in Japan. JFE is helping us develop new products while moving up the technology value-chain. This collaboration has worked wonderfully for both parties. Furthermore, our rolling mill was brought in from SMS Germany which is a leader in its sector. We now have partnerships across various industries, we supply to the auto and appliance sectors.
7. What is the added value of International Steels compared to its competitors such as Aisha Steel?
There are currently only two flat steel manufacturers in the country, Aisha Steel and ourselves. Aisha Steel has so far only produced cold rolled steel and they have just begun moving towards galvanized steel in March 2019 so it is too early to say what they will bring to the market. Between the two companies, we have significantly reduced the imports in our respective sector. For instance, the cold rolled steel market is about 800,000 tons and with both companies expansion, the country will become entirely self sufficient. For our second product, which is galvanized steel, the market today is about 700,000 tons including the color-coated product. We have a 65-70% market share and with Aisha Steel coming in this sector, the local production will meet the national demand and the domestic industry will meet the national need in the next 3-4 months.
It is important for the government and the country to produce locally because we have got a fairly well trained workforce. We have enough engineering universities in the country to produce sufficient manpower which can operate facilities. There is a significant number of Pakistanis who work overseas in the manufacturing sector, the government needs to encourage local manufacturing and try to bring some of these workers back. The government has made a sensible decision in trying to curb imports in order to improve the current account deficit. We are focusing quite extensively on our export and our plan is to increase our exports by 50% and that will hopefully also help the government ease its balance of payment issues.
8. Which marketing strategies are you currently using to promote International Steels Limited ?
Our marketing strategies are built around understanding customer processes, to be able to offer them solutions that are cost effective and beneficial for them. One of the big advantages of buying from us is that our customers do not need to stock up significantly as we also offer small quantities of our products. It saves them from the price fluctuations internationally and on the exchange rate. Regarding the Middle-Eastern market, we have a competitive advantage as shipping transits are quick. We have created a niche for us in these markets primarily based on using our location as an advantage. Another strategy we are using is that we are now setting up warehouses and storage facilities for clients all over Pakistan to have an easier access to our products.
9. You have four focus areas in terms of Corporate Social Responsibility (CSR), investing in your people, making steel more sustainable, enriching your communities and transparent governance. How important is CSR for International Steels? and in which CSR projects are you involved in, lately?
We have taken education and health care as the two focus areas at the moment. We have three major education initiatives. Number one is setting up schools with citizens foundations. We have set one up and we are in the process of setting up a second one. Secondly, we have recognized the importance of vocational training. There are two organizations that we financially support and we also invite students to come work with us and get industrial experience. Lastly, we provide scholarships to high achievers from universities and support them through their education. In the heath sector, we have collaborated with an organization and helped them set up a clinic that provides healthcare facilities in the area that is closer to our factory in Karachi. Furthermore, we have a number of other initiatives with other health care institutions across the country.
10. You have over 20 years of international work experience. Prior to joining ISL, you served as Managing Director of Linde Pakistan Limited, and served in various senior management assignments with group subsidiaries in the Philippines, Malaysia and south east Asia for over ten years. You first started as COO of the company in August 2013 and became the CEO in August 2015. What do you feel most proud of in your personal life?
I am very proud of my successful career. I have had the opportunity of working in global teams and associations in several countries. Making a transition from the gaz industry to the steel industry and working with my current team are perhaps the highlights of my career. ISL is focused on corporate governance, systems and processes and yet it has the ability to react at the speed of an entrepreneur. We have a board that is extremely independent with people who bring in diversified experiences from various sectors of the economy. It has been a fantastic experience so far. On the other hand, on a personal level, I always say that perhaps overriding all my success are my two kids, my son and my daughter. My son is finishing university very soon and my daughter is finishing her A levels. These two make live more meaningful.
11. What is your final message to the readers of USA Today who consider Pakistan as a potential investment destination or are looking for partnerships in the steel industry?
My suggestion and advice to anyone interested in our country is to look at its fundaments, which I believe are very attractive for business growth. Pakistan has an enormous population of young people who will be the consumers of tomorrow. Most businesses that have come to Pakistan have been extremely profitable and a lot of those companies have operated here for decades spanning almost half a century. Pakistani workers are as capable and competent as in any other part of the world. There are huge opportunities and they are just starting to unfold. My final message for the readers of USA Today is to look at various industries in Pakistan, amongst them all manufacturing and steel, which I believe will almost double in the following decade.