Steel Mill

  • The availability of low-cost iron ore and potential coking coal deposits, coupled with local and regional demand for steel and its by-products, may make Afghanistan an attractive location for an integrated steel mill. The current state of infrastructure, on the other hand, is a significant constraint.
  • The steel report examines the viability of the AFISCO consortium’s initial commitment to build a steel mill with an annual capacity of 7 million tons in Afghanistan.
  • The consortium has been awarded three of the four blocks of the Hajigak iron ore deposit, and its steel mill proposal assumes that proximate coking coal deposits can be used.
  • The demand estimations for potential sales for an Afghan mill are projected at approximately 2 million tons by 2025, including sales into Central Asia. A mill with a capacity of 7 million ton is unlikely to be viable, except in the very long-term and with infrastructure available to export beyond Central Asia.
  • In regards of the immediate target markets the prime market for Afghan steel will be regional (Afghanistan, Uzbekistan, Tajikistan, Kyrgyzstan, Turkmenistan, and possibly Northern Pakistan).
  • China as a market is not suitable for Afghan steel. Although the country overwhelmingly dominates both production and consumption of steel in the region, it is expected to remain self-sufficient in steel. 
  • India, on the other hand, is likely to remain a net steel importer over the medium term, but potential for self-sufficiency and current infrastructure constraints largely rule it out as a market for Afghan steel.
  • Since over-sized steel mills are highly liable to failure, and the most realistic market demand is for approximately 2 million tons, a phased investment is advisable.
  • Besides iron and steel, the mill would generate byproducts such as gas, tar, and slag, for which local markets are likely.

Updated October 28,  2013