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Pakistan steel industry will meet future demand

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Pakistan steel industry will meet future demand

Ismat Sabir

It has not yet been decided to privatization to Pakistan Steel Mills revived it. The Prime Minister’s Advisor on Commerce, Textile, Industries and Production and Investment, Abdul Razak Dawood said that a case of PSM is already with the National Accountability Bureau (NAB). There might be five to six interested buyers and the government was making fresh efforts to privatize the PSM as early as possible. The ECC further approved a proposal of communication division to provide technical supplementary grant amounting to five million rupees for the construction of additional carriageway on Torkham-Jalalabad road under the Prime Minister’s programed to trying for reconstruction of Afghanistan. CEO PSM said we wrote letter to the Ministry of Industries and Production (MoIP) on December 2018 seeking approval for the appointment of a permanent chief executive officer.
As the PSM remained nonfunctional, employees are totally dependent on federal grant for salaries that have not been given for three months. Acting CEO PSM Naeem Jan said the Steel Mills offered the Board of Investment to lease 1,500 acres for industrial development and relevant utilization under the China-Pakistan Economic Corridor at 35 percent down payment. Steel demand to reach 10m ton in 2 to 3 years will need expansion and investment in near future Said Chief Executive Officer, Aisha Steel Mills Limited. Currently, Aisha Steel Mills is undergoing expansion to increase CRC production capacity to 450,000 ton. A continuous galvanized line with an annual capacity of 250,000 ton is also being added taking overall production to 700,000 ton per annum. The products will be sold in the local market and surplus will be exported.
Dr. Munir Ahmed said the consumption of steel in Pakistan is around 35 kg per capita. Domestic steel production is to reach 4.5 million ton by mid-2019. Additional steel capacity of 1.7 million ton is expected to come online by mid-2019, as major players in the domestic industry are pursuing aggressive expansion plans at a cost of around Rs15 billion to cash in on the rising domestic demand. This would augment the local steel production capacity to 4.5 million ton from the current 2.8 million ton capacity.
International Steel, for instance, increased its CRC capacity from 250,000 ton to 550,000 ton during FY15 to FY16 after converting their compact cold rolling mill to a twin stand reversing mill. Similarly, their galvanizing capacity increased from 150,000 ton to around 460,000 ton after adding a second galvanizing line. They are currently in the process of upgrading their CRC capacity from 550,000 ton to 1.0 million ton at an estimated cost of Rs5.6 billon.
Amreli Steels has diversified its product base, producing billets as well as rebar. Their capacity for rebar production has grown from 180,000 ton to first 300,000 ton and eventually 425,000 ton and for billets from 100,000 ton to 600,000 ton. Capacity to expand the CRC to 750,000 ton. Aisha Steels is also expanding its operations vertically. It plans to produce galvanizing products as well as CRC. An investment of Rs3.9 billion would take its capacity from 220,000 ton to 450,000 ton for CRC while introducing new capacity of 250,000 ton for galvanized coils.
Mughal Steel is investing around Rs1.0 billion to increase its total capacity from Pakistan’s key relationships are with China, US, India, Russia, Afghanistan, Iran and the European Union.
Steel bar Sales Slump
A substantial number of re-rolling mills were shut down in Sindh and Balochistan in November owing to negligible demand following a ban on construction of high rises in the metropolis. Steel bar sales have slumped in the last three months amid slow demand due to suspension of mega projects by the government and private sector developers. An analyst at Top Line Securities said that the Iranian steel in local market is putting pressure on local rebar prices as Iranian product sells at Rs98, 000 per ton as against locally produced Rs104, 000 to 105,000 per ton.
Besides, local players have reduced their prices to Rs105, 000 from Rs110, 000 per ton to stay competitive in the market. Kashif Ayub said that more than 300 mills in Sindh, Balochistan and Punjab have resumed production after suspending their operations last month. They are, however, running at 20 to 25pc production capacity owing to sharp fall in orders.
Chairman Association of Builders and Developers (ABAD) Muhammad Hassan Bakshi said that the construction industry is passing through a critical period due to the existing ban on construction of high rise buildings in Karachi. He said that ban on high rise have hurt the construction industry as around 600 projects are currently awaiting approval, investments in the sector have stopped and more than 500,000 people are rendered jobless. Government projects account for nearly 50pc of the total steel bar sales, 35pc come from private high rise and housing projects and remaining from the individual construction by consumers.
According to SBP’s State of the Economy report for FY18, steel manufacturing grew by 22 percent during FY18, and 21 percent in the preceding year; some of the highest growth numbers in Large Scale Manufacturing sectors. Much like twin industry cement, steel makers experienced a notable boost as the economy expanded.
Demand rose at the back of CPEC led infrastructure projects, higher development spending, greater housing and real estate activity especially in large housing and commercial projects, and fast growing steel consuming industries like automobiles transportation and light engineering. Anti-dumping duties on Chinese steel, and state imposed regulatory duties allowed steel makers to grab higher market share and raise prices. The gap between imports and domestic supply has persisted despite the 20 percent on average annual growth in production the past two years, and the multi layered tariff protection afforded to domestic players.
For every six ton of cement, one ton of steel is used for construction. That can be a good starting point. By 2022, Pakistani cement industry will have about 70 million ton of capacity. By that estimate, steel capacity should be around 12 million ton, but it is only going to be 4.5 million ton. However, how much of the new cement capacity will be absorbed is a big question mark. Demand coming from CPEC projects already underway will remain but the new Imran led government has cut down a lot on development expenditure. Meanwhile, interest rates are not conducive for new investments. Real estate development, especially in the commercial sector may become lethargic. It is anticipated that automotive demand will also get affected going forward which in turn would affect steel demand. This reduction in demand could be met with the Naya Pakistan Housing plan that envisages to construction five million new houses. BR Research estimates, that should lead to an annual 20 to 22 million ton of additional cement.
Cement companies have invested in expanding operations in anticipation of burgeoning demand owing to construction activity under the China-Pakistan Economic Corridor and the growth in housing projects.
The Steel Industry is catching up Fast with the Expected Rise in Demand.
As per international standards, every five ton of cement used in infrastructure projects require one ton of steel. Around ten steel mills are listed on the Pakistan Stock Exchange (PSX), most of them having entered into the capital market during 2011 to 2017.This represents the highest number of new listings during the six year period in any one sector. The latest player seeking its way into the PSX is Iteefaq Iron Industries Limited. The company manufactures Re-bars and has the capacity to produce 120,000 ton per year, which is about 2 percent share of the local market.
Steel companies expect to gain supply contracts related to the upcoming infrastructure projects under the CPEC umbrella. These include Orange Line, Karachi-Lahore Motorway and Neelum-Jehlum hydropower project among others. The country’s steel demand is expected to rise at a 3 year (FY17-19) combined growth rate (CAGR) of 15pc compared to the last 3 year’s CAGR of 14 percent. Currently around 45pc of the country’s steel requirement is met through imports, local steel players have significant room for organic growth, says a sector watcher. According to the World Steel Association (WSA), steel use in 2015 was 7.1 million ton in Pakistan, translating to per capita use of 37.5kg. Pakistan’s steel requirement is expected to swell over 12m ton taking the country’s per capita requirement to 62kg by 2019.
Analyst Adnan Sami Sheikh at Topline Securities affirms that the demand of steel has been fuelled by a wave of capital expenditure aimed at capturing the swelling demand of quality steel products that will come about as a result of infrastructure projects such as power plants, dams, airports and road networks along with public and private housing schemes. The specific steel produced to meet those demands is produced by Amreli Steel Limited (ASTL), Mughal Steel Limited (MUGHAL) and soon to be commenced by Dost Steels Limited.
Manufacturing growth led by investments in the auto and appliance sector is expected to spike demand for flat steel rolled by International Steels Limited (ISL) and Aisha Steel Limited (ASL). The rehabilitation and expansion cycle in oil, gas and other industries, along with planned pipelines projects, would require huge quantities of steel pipes welded by Crescent Steel and Allied Products (CSAP), International Industries Limited (INIL) and Huffaz Seamless Pipes (HSPI).The company is also introducing a new Galvanized product line (GI) with a capacity of 250,000MT per annum.
A report by Alfalah Securities observed that scrap currently trades at $250 per ton, from $281 per ton in March; HRC at $396 per ton to $474 per ton; Cold Rolled Coils (CRC) at $462 per ton from $591 per ton and Hot dipped galvanized coil (HDGC) at $548 per ton to $640 per ton.
As a result primary margins for CRC-HRC currently hover around $66 per ton and HDGC-HRC margins are around $152 per ton. Scrap prices in contrast have been comparatively stable and averaged at $242 per ton. The National Tariff Commission (NTC) has imposed antidumping duty in the range of 819pc on import of CRC, and 6 to 40pc on import of HDGC, to counter steel being dumped from Chin. By the government, adverse movement in HRC Cold Rolled Coil (CRC) spread in international market, power supply problems and slowdown in economic activity.
Steel products have been of great value for mankind since ages due to their usage. They are predominantly used in housing and construction sector from decades. E steel re-rolling mill is a project of the light engineering sector that mainly entails the production of Round Bars, T-Bars, and Angle Bars of different grades.
Pakistan Steel Mills
Pakistan Steel Mills Corporation (Pvt.) Limited, also known as Pak Steels, is a ding to Headquartered in Karachi, Sindh Province of Pakistan, the PSM is currently the largest industrial mega corporation, having a production capacity of 1.1, 5.0 million ton of steel and iron foundries. Built with the contributions of the Soviet Union in the 1970 , it is the largest industrial mega corporation complex, vastly expanded in an enormous dimensions construction inputs, involving the use of 1.29m cubic meters of concrete and 5.70mln cubic meters of earth work, and containing ~330,000 ton of heavy machinery, steel structures and electrical equipment.
A controversial attempt was made to privatize the steel mills to global private ownership under a counter measure Privatization Program of Prime Minister Shaukat Aziz All attempts were thwarted by the Supreme Court which launched a full-fledged investigation against the attempts to privatize as private sector and lost the control of the .steel mills in a matter of weeks. In spite of its enormous size and expansion, only 18pcpc of the capacity was in use and the steel mills requested a bailout plan of Rs.12 billion to prevent its closure; the bailout plan was dismissed by the government. Finally, the steel mills were brought back to government-ownership management under an inverse counter-measure Nationalization Program of Prime Minister Yousaf Raza Gillani. Since then, its operational plant capacity has reached 30pc-50pc after seeking the
History
Main articles: Pakistan Soviet Union relations and Pakistan Council of Scientific and Industrial Research. After the creation of Pakistan in 1947, the Government of Prime Minister Liaquat Ali Khan realized the importance of local production of iron and steel. Initially, the dependence on imports caused economic setbacks to the state in the form of high import cost. The initial idea and studies were conceived by the Council of Scientific and Industrial Research (PCSIR) and put forward the concept to the Five-Year Plans of Pakistan (1955 to 1960). In 1958, Soviet premier Nikolai Bulganin offered technical and scientific assistance to Prime Minister Suhrawardy regarding the steel mills and expressing interests in establishing the country’s first steel mills.
The project was comprehensively debated in the governments of Prime Minister Huseyn Suhravardy and President Ayub Khan. The manufacturing process, supply sources of the requisite machinery and raw materials, plant site, domestic ore versus imported ore, ownership pattern, product mix and all foreign financing credit kept the project on hold for a considerable time.
After 20 years of policy development and studies of PCSIR, President General Yahya Khan gave the approval of the recommendations of the state-owned scientific think tank, the Council of Scientific and Industrial Research. Bureaucrats and scientists agreed upon a unified decision that the “Karachi Steel Project” would be sponsored in the state-public sector, under which a separate corporation sanctioned by the Companies Act, would be formed.
In pursuance of this decision, the Pakistan Steel Mills Corporation Limited (PSM Ltd.) was commissioned and incorporated as a private limited company in a public sector in accordance with the Companies Act of 1913, to be established in Karachi, Sindh Province of Pakistan. Contacts were made with the United States but the U.S. government showed lack of ambition and interest in the project; therefore the studies were sent to the Soviet Union, which took the initiatives. The United States refused to give any kind of assistance.
Finally, an agreement was reached with the V/O Tyaz Promexport of the Union of Soviet Socialist Republics (USSR) in January 1969. In 1971, Pakistan and Soviet Union finally proceeded to enter into a government agreement, upon which, the Soviet Union agreed to provide techno-financial assistance for the construction of a coastal based integrated steel mill at Karachi.
LABOR DEVELOPMENT
Pakistan Steel Mill is listing with the nation capable to produce steel (10 to 50mln ton of steel) and iron foundries locally. In 1956, the Krupp industries of West Germany offered to set up a steel mill based on Kalabagh iron ore, coal and most other minerals available within about 11 miles (18 km). The project was dismissed by the Ministry of Energy led by its minister Zulfikar Ali Bhutto who accepted the Soviet studies instead as Bhutto favored the idea to establish one single enormous steel mill based 100pc imported steel and iron ore instead of local ore at Kalabagh District. In June 1966, another West German steel firm, the Salzgitter AG, produced ~5,000 ton of quality stpc el from 15,000 ton of Kalabagh iron ore in the presence of some international experts, and sold it to Volkswagen. The company offered in August 1967 to set up Kalabagh Steel Mill of over 0.8 million ton per year capacity based on Kalabagh iron ore and imported coal at an estimated cost of Rs. 1.55bln, including a foreign exchange cost of Rs. 878mln. The European banks offered loans for this project, which confirms technical and financial viability of the project. All attempts were dismissed after projects were politicized enough in the civil bureaucracy.
The Pakistan Steel Mills was established as an integrated steel mill under a program called Nationalization program in the 1970s. The foundation stone for this gigantic integrated project was laid on 30 December 1973 by Prime Minister Zulfiqar Ali Bhutto. The mammoth construction and erection work of the integrated steel mill, never experienced before in the country, was carried out by a consortium of Pakistan construction corporations under the supervision of Soviet and Pakistani experts. Khaja Inayath Ullah was the Director Operations and Chief engineer of this project. (Blast furnace 1, 2 and RMPP)
The main production units were constructed with a host of infrastructure facilities involving unprecedented volumes of work and expertise. Component units of the steel mill numbering over twenty and each a big enough factory in its own right were commissioned as they were completed between April 1981 to August 1985, with the coke ovens and byproducts plant coming online first and the galvanizing unit last. The commissioning of Blast Furnace Number 1 on 14 August 1981 marked Pakistan’s entry into the elite club of iron and steel producing nations. The project was completed at a capital cost of Rs24.7Mn. The completion of the steel mill was formally launched by President General Zia-ul-Haqon 15 January 1985.
Soviet scientist Dr. Mikhail Koltokof flew to Pakistan and settled in the country to provide training to Pakistan’s technical staff. Engineer Niaz Muhammad and materials scientist Wahab siddiqui received training in Soviet Russian and trained thousands of scientists and technical staff. Their inspirations and innovations led them to earn the highest award from Pakistan, and also from Soviet Union. The Government of Pakistan conferred them with Pride of Performance.
Dividends and Business Assets
Pakistan Steel Mills not only had to construct the main production units for 2.2 MTPY, but also a host of infrastructure facilities involving unprecedented volumes of work and expertise. Component units of the steel mills numbering over twenty, and each a big enough factory in its own right, were commissioned as they were completed between 1981 and 1985, with the Coke Oven and Byproduct Plant coming on stream first and the Galvanizing Unit last. Commissioning of Blast Furnace No.1 on 14 August 1981 marked Pakistan’s entry into the elite club of iron and steel producing nations. The project was not completed at a capital cost of Rs.24, 700 million and commissioned for production of 1.1 MTPY. Due to its infrastructure and enormous expansion capacity, it is difficult to determine the current value of assets of Pakistan Steel Mills, while others approximating the business assets reaching to then range from Rs72.5Bn to Rs100ln of total value. By estimating, including the heavy machinery, dividends, facilities, and external and internal assets, the market price of the land of the Steel mills are exceeding to the amount of Rs125.5Bn, as per the government estimates against the market value of Rs945 billion as on 2006 investigation by a potential bidders who was withdrew from the bidding process for reason not known.
The completion of the steel mill was forced to stop due to liquidity crises and formally launched after 12 years by the then-President of Pakistan General Muhammad Zia-ul-Haq on 15 January 1985. Pakistan Steel today is the country’s largest industrial undertaking, having a production capacity of 1.1 million ton of steel and not completed to its lay-out design of 2.2 MTPY in a period of 40 years (1973 to 2013). Pakistan Steel Mills are one of the enormous and gigantically expanded industrial complexes in the country that is located at a distance of 40 km Southeast of Karachi at Bin Qasim near Port Muhammad Bin Qasim. It was found to be an ecologically preferable location, alongside a tidal creek and having a wind direction away from the city of Karachi.
Pakistan Steel Mills is spread out over an area of 18,660 acres (75.5 km2) (about 29 square miles (75 km2)) including 10,390 acres (42 km2) for the main plant, 8,070 acres (33 km2) for the township and 200 acres (0.8 km2) for the 110 MG water reservoir. In addition it has leasehold rights over an area of 7,520 acres (30 km2) for the quarries of limestone and dolomite in the Makli and Jhimpir areas of Thatta district. It is one of the largest industrial complex in Pakistan as well as in South Asia and due to its enormous expansion, the steel mill has its own educational facilities housing and residential program, parks and recreation facilities and police services apart from the provisional authorities.
Environmental Records
Due to its importance, the steel mills followed a strict environmental policies regulated by the Environmental Protection Agency (EPA) of the Ministry of Environment (MoE). All health safety and healthy working environment continuously regulated under a designed system. Pakistan Steel Mills, besides its core activities, has done a lot in making the environment in and around Pakistan Steel green and beautiful through the addition of three unique projects; the Quaid-I-Azam Park; The Quaid-I-Azam Cricket Park; and the Quaid-I-Azam Beach. The Quaid-I-Azam Park, which spreads out over an area of 45 acres (0.18 km2), consists of a series of six interconnected lakes, lush green lawns and grassy terraces, colorful flower beds, fountains, life-size steel-made models of wild and marine animals, a jogging track, a bird sanctuary and mini-zoo, as well as a children’s play and recreational ground and boating facilities.[16] The steel mills also active in sports development and also has a football team Pakistan Steel FC that currently competes in the Pakistan Premier League.
Since its foundation, the steel mills has been under the management of government-ownership and strictly put under the close coordination of civil bureaucracy. In 2006, Prime Minister Shaukat Aziz decided to integrate the steel mills under the intensified program, called the Privatization Program. When the news reached to the country, amid demonstration and spontaneous protest began to take place against the government of Shaukat Aziz and sparked lengthy debates in parliament, which members of the opposition walked out?
The consortium involving Saudi Arabia-based Al Tuwairqi Group of Companies submitted a winning bid of $362 million for a 75-c stake in Pakistan Steel Mills at an open auction held in Islamabad. The consortium including the Magnitogorsk Iron and Steel Works (Russia); the al-Tuwairqi Group of Companies (Saudi Arabia); and the Arif Habib Securities (Pakistan) paid a total Rs21.6 billion ($362 million), or Rs.16.8 per share, to take control of Pakistan’s largest steel manufacturing plant. Tuwairqi Group of Companies, one of the Leading business concerns in Saudi Arabia, also launched a $300 million steel mills project at Bin Qasim. The group will set up Tuwairqi Steel Mills (TSM), a state of the art steel making plant in the southern port city of Gawadar, Pakistan.
Controversies
The Supreme Court on 8 August 2006 held that the entire disinvestment process of the Pakistan Steel Mills reflected haste, ignoring profitability aspect and assets of the mills by the financial adviser before its evaluation. The transaction was the outcome of a process reflecting procedural irregularities, said the 80-page judgment in the PSM case.
On 23 June, a nine-member bench of the Supreme Court had annulled the sale of the country’s largest industrial unit to a three-party consortium and had directed the government to refer the matter to the Council of Common Interests (CCI) within six weeks. It had declared the $362 million transaction with the Russian-Saudi-Pakistan investors as null and void.
Authored by Chief Justice of Pakistan Justice Iftikhar Mohammad Chaudhry, the judgment said the entire exercise reflected haste by the Privatization Commission (PC) and the Competitive Committee on Privatisation (CCP). The PC had processed on 30 March final report of the financial adviser the same day and a meeting of the PC board and a summary had also been prepared the same day when a six-week time was mandatory to examine and fix a fair reference price for approval by the CCOP.
Nationalization
The privatization had the disastrous effects on steel mills, and it was lost by the private sector due to their inability to run such giant large scale operations of steel mills. Under private sector, the steel suffered loss in its net worth and declining of producing capacity of the steel mill. The Economic Coordination Committee (ECC) was forced to approved a bailout package after the private sector, the Tuwairqi Steel Mills pulled off its investment from steel mills instead established another steel mill industry to compete against the steel mill.
Despite all its problems, the steel mills are a paradigmatic employer and would rather see it run into the ground than mistreat its long standing employees. In the midst of all the troubles that it is facing, the mill started issuing letters confirming their jobs and start producing the heavy steel and iron materials. After leading to an infernally long protest and inability proved by the private sector, the government of Prime Minister Yousaf Raza Gillani activated the nationalization program after accepting the recommendations, despite protest lodged by the Finance minister Abdul Hafeez Shaikh.
In 2011, the steel mill was put under the management of government ownership, expanded and re-structured the board of directors would be restructured and expanded, from the current nine to twelve members as well as approving another bailout plan. In matter of weeks, the private-sector voluntarily handed over the operations of steel mills to government-ownership management, a move that was widely appreciated in the public society and workers’ unions. Since under the government-ownership, the steel mills infrastructure and available capacity was restructured and expanded. In 2012, Ukraine announced to provide the technological development and help in restoration of raw materials supply chain after viewing the performance of steel mills. The Ukrainian Ambassador quoted, for major operational units of Pakistan Steel Mills are remarkable. The Ambassador of Ukraine Volodymyr Lakomov said that Ukraine is keen to make business relationship with Pakistan and the steel mill PSM will be a symbol of friendship between the two countries.
Japanese firms to invest in Pakistan’s steel industry’
Adviser to Prime Minister on Commerce, Textile and Industries Abdul Razak Dawood said that officials from major Japanese firms are scheduled to visit Pakistan next month for making investments in country’s steel and baby formula milk industries.
Dawood informed that last month Japanese companies assured to invest in Pakistan during the bilateral trade talks in Japan. He said a delegation of Japanese companies, manufacturing steel and baby formula milk, will be visiting Pakistan after January 15.
Moreover, the Japanese government also promised to allocate skill development and technology development funds for small industries in Pakistan, the PM adviser said. He said that talks on a change in independent trade agreement with Malaysia will also be held in January, whereas the projects under the first phase of China-Pakistan Economic Corridor will be completed in next 10 to 12 months.
The PM’s advisor said the Pakistani government has been working on a policy to give incentives to industrial sector for increasing exports while separate policies would be drafted for each industry.
Prime Minister Imran Khan while addressing Pakistan Economic Forum two days earlier said his vision was to make Pakistan a financially viable and economically self-reliant country, by getting rid of the dependency syndrome. He explained that wealth creation was necessary to take the country forward and a business friendly culture would be introduced in the country to encourage businessmen to invest their capital in various sectors.
Pakistan’s first Chinese steel mill commences production
With an aim to cater to the infrastructure needs of the China Pakistan Economic Corridor (CPEC), the country’s first Chinese steel mill commenced its operations in Karachi on Saturday. The Pak China Steel (PCS) Company, a joint venture between Pakistan and China’s Jiangbang Group, was established in March this year with an investment of $12 million to cater to the demand for crude iron by local industries. The installed capacity is 8,000 ton, per months of pig iron and liquid pig iron which would be further expanded, Xiaonian Wu, Chairman of Shanxi Jianbang Group, said during the inaugural ceremony of the PCS Company at Port Bin Qasim.
The coal-fired blast furnace is the first facility in the private sector of the country which utilizes the indigenous iron ore extracted from the mines of Balochistan. Raw materials such as iron ore and limestone are local while metallurgical coke is imported. The facility will be an incredible chapter in the industry of Pakistan, Wu said.
At present, the facility is producing 4,000 to 5,000 metric ton per month which would be gradually increased, he added. The facility is being run by officials from Pakistan who will be supported by technical experts from China. PCS has provided employment opportunities to 200 locals while 60 Chinese nationals are providing technical support, Wu said.Currently, the demand for Pakistan’s crude iron is being met through imports and shipbreaking industry. We are looking at supplying pig iron to countries with local material of high quality, Mustafa Dawood, a local partner of PCS, said.
Last year, Pakistan imported base metal including iron and steel worth $4.78 billion to meet the domestic needs. We want to completely substitute the import of iron ore with local production and utilization of iron products. This is the first collaboration of Pakistan and China in the steel sector, Li Felix, Director of PCS said. In the next phase, the PCS management plans to export pig iron to China, Thailand, and a few other countries.
Wu said that the CPEC has the potential to become the real and potential game-changer in the region and beyond promoting quality and competitiveness worldwide. We are expecting to meet the growing demand of steel coming from CPEC projects, he said. However, the per capita steel consumption in Pakistan is very low at 23.5 kilograms, against 58.6 kilograms in India, as well as the Asian average of 261.3 kilograms and the global average of 216.9 kilograms.
The Future of Pak Steel Mills
The previous government’s tendencies to allocate revival of State-owned functionaries to Chinese consortiums appear to have passed down to this current government as well. The Pakistan Steel Mills (PSM) Board is in the books to suggest to the federal government to hand over the steel mill to a Chinese consortium on built operating transfer (BOT) basis for 30 years. A Chinese consortium consisting of Chinese Metallurgical Corporation of China Ltd (MCC) and Donghua Iron and Steel Group is interested in taking over PSM on BOT basis.
A BOT basis seems to be the only financially viable way to go about to transfer and revive the Steel Mill Industry. A built operate transfer approach is a form of project financing, wherein a private entity receives a concession from the private or public sector to finance, design, construct, own, and operate a facility stated in the concession contract. Other forms of reviving the PSM involved either privatizing the Steel Mills- which was a risk too large to take and could result in further unemployment, or taking a commercial loan for its revival, which would not be feasible for the economy, considering our increasing debt. A public private ownership seems to be the way to go, and will benefit both the government and the Chinese consortium.
The government is in its rights to transfer the PSM to the Chinese consortium, and indeed it should if it feels this will bring about the best most efficient results. However, before making any such contract, the government should be careful to set terms and conditions to protect our local workers and economy. Greater economic cooperation with China can be a game-changer for Pakistan and CPEC is popular among the Pakistani public yet with increasing tax exemptions for Chinese companies and dealings being in yuan, there is a fear among Pakistani workers of the local economy suffering in competition. More investment does not always mean more employment