The management of Agha Steel Industry Limited (AGHA) held a Corporate Briefing session today to discuss the company’s performance and future outlook.
Highlights:
· AGHA’s new plant will come online in Jun’22.
· Most equipment for MI. DA has been imported but could not be installed due to COVID restrictions.
· Cost overrun has been around PKR 1.2bn (PKR 600mn due to COVID and inflation while PKR 400mn due to improve efficiencies).
· Scrap mix can be changed by AGHA due to its electric arc furnace, thus it faces little to no risk to supply disruptions. DRI can range anywhere between 60-85% of the mix.
· Current scrap prices are USD 425-450/ton (DRI) and USD 550-560/ton (other scrap).
· Capacity of 132KV KEL dedicated grid line.
· AGHA is working on containing its energy costs so it can become an exporter of steel.
· Also looking to tender for a 3-3.5MW solar plant in upcoming plants.
· Landed cost of imported billets is currently USD 750/ton, which translated to PKR 190,000/ton.
· Currently AGHA has inventory of 80-85 days.
· AGHA is selling billets at PKR 160-165,000/ton.
· AGHA does not target growing too aggressively once MI.DA comes online, company wants to grow sustainably.
· AGHA foresees going into the commercial sector as it’s the largest segment. Currently its 70:30 institutional : commercial.
· Sales to Punjab region by AGHA are now 25% of the mix (previously only 10%).
· Freight costs to cities in Punjab varies between PKR 3,500-4,500/ton.
· It is difficult to contain prices as scrap is on the rise, inflationary pressure is ongoing, input prices of electricity are going up and PKR is losing ground.
· Gaddani is back to operating at its maximum capacity of 1mn tons. It has also started supplying scrap (15%) to the local industry, to small re-rollers, due to extremely high imported scrap prices. However, while these players save 3-4% in costs, the ship supply is getting tight amid very high freight costs.
· AGHA is looking at other segments (wire rods etc.) and will announce once finalized.
· Graphite electrode prices are ranging between USD 1,500-2,000/ton at present. AGHA’s management expects this to come down with new supply coming online from China.
· Current electricity tariff is PKR 19-20/KwH.
Courtesy – AHL Research