In a significant blow to foreign investment in Pakistan, Century Steel Group, one of China’s largest steel manufacturers, has issued a stern warning to the government, threatening to cease operations and withdraw its investment from Pakistan.
The threat was made through a letter sent by Century Steel Group’s CEO, Li Chunjian, to Prime Minister Shehbaz Sharif. The company stated that it would dismantle its plant at the Rashakai Special Economic Zone (RSEZ) in Khyber Pakhtunkhwa (KP) unless the unresolved issues affecting their business are addressed promptly by the Pakistani government. The letter indicated that the company had made this decision after years of unaddressed concerns, marking this as their final notice.
The issues highlighted by Century Steel Group included delays in signing a plot purchase agreement with the KPEZMC (Khyber Pakhtunkhwa Economic Zones Management Company), high land prices, and significant power supply challenges. The steel mill, which had planned to become the largest in Pakistan, requires 100 MW of stable and cost-effective power, but the necessary arrangements had not been made by the RSEZDOC due to unresolved issues with the National Electric Power Regulatory Authority (NEPRA).
Despite initial optimism and an $82 million investment in the first phase, with over $30 million already spent, the company is facing mounting losses. The steel mill, which aimed to produce 500,000 tons of steel products annually in its first phase, was also set to expand its operations in the subsequent phases, bringing in over $200 million more in investment for downstream steel production and advanced technology transfer from China. However, these plans have been put on hold due to the unresolved challenges.
The letter further mentioned that the company had suffered a loss of $7.5 million in maintenance and staff expenses during the waiting period of over five years. The lack of a clear SEZ policy and weak incentives for Foreign Direct Investment (FDI) had also been major setbacks for Century Steel Group. The company criticized the rising energy costs and taxes on steel, which had already forced other large-scale mills, such as Amreli Steels and Agha Steels, to shut down.
In addition, the company raised concerns about the ongoing security protocols, which had significantly increased operational costs, and the lack of support from local banks, despite approval from the State Bank of Pakistan (SBP) for machinery imports under the FOC policy.
The Chinese company also pointed out that substandard steel production from small steel mills in regions like FATA and PATA was damaging the market, further compounding the difficulties faced by larger, formal mills like Century Steel. The company’s management criticized the government’s failure to enforce quality standards, which they said had led to an unsustainable business environment.
In light of these ongoing issues, Century Steel Group expressed its intention to report the matter to the Chinese government, the embassy, and the international press, indicating that their patience had run out.
The company’s decision comes at a time when Pakistan is in urgent need of foreign investment, particularly under the China-Pakistan Economic Corridor (CPEC) initiative. Century Steel Group’s warning represents a potential major setback for the economic cooperation between Pakistan and China. A committee, led by Aleem Khan, has been formed by the Prime Minister’s office to address the grievances of the company, which includes members from both the federal and provincial governments.
