This study, “Enhancing the Competitiveness of Pakistan’s Aluminum Utensils Sector” is a joint study conducted by the Pakistan Business Council (PBC) and the Engineering Development Board (EDB) with support from the All-Pakistan Aluminum Utensils Manufacturer’s Association (APAUMA). This study is a part of the “Make More/Make Better” pillar of the PBC’s Make-in-Pakistan initiative. Aluminum utensils consists of frying pans, sauce pans, woks, baking trays, pressure cookers, tawas, BBQ units, mixing bowls etc., and are widely used in households, restaurants, and other food-related businesses due to their durability, lightweight nature, and affordability.

As part of this study, the PBC conducted secondary research of available data and supplemented it with interviews/field visits with major firms operating in Pakistan in this category. The study identifies the opportunities and challenges in the aluminum utensils sector and proposes a set of policy recommendations aimed to increase exports of Aluminum Utensils from Pakistan.

Global exports of aluminum utensils registered a growth of 79.2% between 2012 and 2021, increasing from USD 4.1 billion in 2012 to USD 7.3 billion in 2021. China is the largest exporter of aluminum utensil products having a share of 55% in total global exports in 2021.

Pakistan ranked 24th in the global aluminum utensils exporters list in 2021. Despite numerous constraints, Pakistan has witnessed a growth of 28% in aluminum utensils exports over the past five years. Almost 40% of the total aluminum utensils exports were destined for the UAE and Saudi Arabia.

Pakistan’s aluminum utensils sector presents an opportunity for growth but this growth is hampered by factors primarily related to informal raw material-procurement, shifting demands from aluminum die-cast to iron die-cast, high manufacturing costs, lack of funding by the government, irregular supply of raw material, payment issues, absence of operational Common Facility Centers and lack of testing laboratories.

Major Findings:

Raw material used in the sector is imported
Almost 90-95% of raw material used by this industry is imported, this adds to the working capital requirements of the manufacturers. Additionally, Pak-Afghan border is also used to procure aluminum in the secondary form such as motor scrap, auto parts, foils, etc. This route is not only supplying raw material to the aluminum utensils industry but also to the auto-parts industry and fan industry. However, supplies are erratic and subject to disruptions depending on the state of Pakistan- Afghanistan relations.

Shifting Global demand from Aluminum die-cast to Iron die-cast
Global trends show that cast iron utensils are gaining popularity. Reasons for this are the attributes associated with cast iron such as health benefits and variations in color and enamel coating.

With automation, the number of manufacturing processes reduce but cost increases
The high-pressure die-cast manufacturing method reduces the processes involved in production of utensils from 15-16 processes to only 6-7 processes. This increases the output per day ensuring good profit margins for the producers.

Not much attention is being given to Research & Development
Not much attention is given to research and development by the local manufacturers, this leads to a lack of innovation. Cookware is a low-cost item and hence manufacturers prefer investing their resources on other factors such as electricity, labor retention, taxes etc., rather than on research and development. Only 5-6 percent of local manufacturers invest in innovation. The remaining industry copies the innovation made by these large firms.

Manufacturers are reluctant to avail financing facilities from banks.
Most manufacturers stated that owing to religious reasons, a majority of the industry is reluctant to avail financing schemes offered by banks. Moreover, banks are also reluctant to give loans to SMEs in the absence of quality collateral.

Lack of funding by government in the Aluminum Utensils sector
There is a lack of funding in the aluminum utensils sector from the government which has hindered sector’s growth. Non-availability of high-quality machinery in the common facility centers means SME exporters are unable to manufacture as per the demand of the quality conscious markets.

Tonnage of exports has not increased
Major reason for decrease in quantity of aluminum utensils exports is the rise in prices of the finished goods which has led to increased value but decreased quantity. Additionally, world is also witnessing a global recession due to which consumption patterns have changed and this has impacted the sales of aluminum utensils globally.

Aluminum utensil products from Pakistan are mostly exported on credit
Aluminum utensil products manufactured in Pakistan are not price competitive globally. Hence, to incentivize the buyers abroad, manufacturers in Pakistan export their products on credit which allows payment to be made on a consignment basis.

Recycled Aluminum ingots are exported rather than being sold to domestic industries
Recycled aluminum ingots produced domestically are not supplied to the local industry and are instead exported, major reason being higher refunds given to exporters by the government. This creates a shortage of raw material in the local market for domestic manufacturers.

Extensive aluminum scrap burning to extract aluminum ingots is not environment-friendly
The burning of aluminum scrap to convert it to ingots has impacted the air quality index in Gujranwala. However, if SMEs start investing in SOPs to minimize environment pollution, it will increase the cost of production.

Export payment from the African region has been impacted due to FATF
Currently, the Dubai-channel is used for payments as direct payment issue has been faced from the African countries owing to FATF compliance issues. Money is paid in cash at the Dubai office which is then transferred to Pakistan through the Telegraphic Transfer (TT) route.

Common Facility Centers (CFCs) lack operational capacity
CFCs that are available lack operational capacity which is one of the major reasons for slow growth in the sector.

Customs duty on imports of Aluminum alloy hurts the trade
There exists 40% customs duty on import of aluminum alloy which is used as a basic raw material in the manufacturing of aluminum utensils products. This has compelled the manufacturers to resort to buying raw material in the form of aluminum scrap which is being supplied from Afghanistan and Iran. This not only hurts the local aluminum utensils industry but also the automobile industry of Pakistan.

Limited participation of aluminum utensils exporters in trade fairs
Exporters in this sector have little to no presence in international trade fairs. This reduces the opportunities for local exporters to enhance their businesses with the potential partners resulting in limited footprint abroad.

Increased frequency of FBR annual audits adds to Operational costs
Majority of the exporters in the aluminum utensils sector have complained about frequent sales tax audits leading to increased costs of doing business as exporters have to spend a hefty amount every year in order to maintain their books and documents.

Lack of testing laboratories
Majority of exporters have to get their products tested from testing labs in Dubai due to lack of testing facilities in Pakistan.

Recommendations:

Focus should be on bringing variety in the product range
Existing products need modifications to meet the global requirements such as introducing advanced varieties of pressure cookers. Moreover, global trends have been shifting towards anodized and die-cast aluminum utensils products.

Approach needs to be more Export-oriented
Only 20% of what is being produced locally is exported after meeting local needs. Innovation should be brought as per the international demand with a focus on increasing the export share.

Export of recycled Aluminum ingots should be limited
Majority exporters face issues with the availability of recycled aluminum ingots as these are being exported instead of being supplied to local manufacturers. A limit should be imposed on exporting aluminum ingots in the primary form to facilitate local industry.

Improve working conditions and provide monetary compensation to attract labor
To attract labor in this industry, there is a need to improve working conditions and make the internal working environment of a factory more conducive. This can be done by switching working hours during the summer months to evenings because weather is comparatively much cooler at nights.

Barriers on Import of Raw materials should be removed
Government should look to remove barriers on import of raw materials so that manufacturers can minimize their costs.

Benefits available to the Five-exports sectors should be available to all export sectors
Textile, leather, carpet, surgical and sports good sector are the five sectors that enjoy a number of concessions. These concessions should be extended to other potential sectors as well to promote manufacturing.

Government should subsidize air purifying plants for SMEs
Owing to high cost of installing purifying plants, government should partially subsidize the air purifying plants near aluminum burning furnaces.

Establish bonded warehouses to facilitate exporters
Bonded warehouses should be established to store raw materials used in aluminum utensils industry and other associated industries to facilitate the exports.

Upgradation of Technology & Machinery in the Common Facility Center
Common Facility centers like Gujranwala Tools, Dies & Moulds Center (GTDMC) and Gujranwala Business Center (GBC) should upgrade their technology and machinery for the betterment of the industries in the Gujranwala cluster.

Initiate Industry Development Programs under Public-Private Partnership between SMEDA & APAUMA
SMEDA and APUMA should initiate development projects together to enhance productivity and reliability of the aluminum utensils products.

40% customs duty on import of Aluminum alloy should be removed/reduced
For the industry to import raw material at low cost, it is important for the government to remove/reduce customs duty on import of aluminum alloy.

Inspection from National Productivity Organization (NPO) is required to reduce cost of production
Aluminum utensils industry should avail services of NPO which includes productivity & quality related training programs, resource efficiency audits, consultancy/advisory services and industrial productivity enhancement.

State Bank of Pakistan should facilitate 3rd part payments
A third-party system should be established by the SBP to facilitate payments coming for exports made to the markets which are grey/black listed by FATF or lack banking/payment channels to pay for their imports.

Access to International Exhibitions should be facilitated by TDAP
TDAP should ease the process of participation of aluminum utensils manufacturers in international exhibitions by providing them with information about visa processes for different countries, exhibition pavilion/stall prices for different product categories and arrange meetings with relevant businessmen to boost trade.

Single Country Exhibition Model can boost exports for the sector
Single country exhibition model should be followed where annual exhibitions can be held in countries where there is potential to increase exports. This should only be open for aluminum utensils manufacturers where they can showcase their products and interact with importers.

Vocational training should be provided by creating linkage with the Light Engineering Upgradation sector
Vocational training should be provided to labor and allocated to different factories as per the requirement.

Pakistan Single Window training workshops should be held annually for exporters
Annual training workshops should be provided to the exporters

Reduce the frequency of FBR audits to reduce operational costs
Audits should be reduced to once every 3-4 years to reduce the burden of manufacturers of extensive book keeping.

Funding is required for high-tech machinery in CFC of aluminum utensils sector
Government should provide funding to aluminum utensils sector from the Export Development Fund (EDF) and help exporters by upgrading the CFCs that would benefit everyone in the sector. Additionally, SMEDA could also be involved in funding of the schemes by developing easy-loan/quick-loan programs for exporters.

The PBC is a private sector not-for-profit advocacy platform set-up in 2005 by 14 (now 100+) of Pakistan’s largest businesses. PBC’s research-based advocacy supports measures which improve Pakistani industry’s regional and global competitiveness. More information about the PBC, its members, objectives and activities can be found on its website: www.pbc.org.pk

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