Pakistan’s steel industry is going through a crisis period due to severe restrictions on LC opening. Major mills such as Mughal Steel, Agha Steel, Amreli Steel, and members of the Pakistan Association of Large Steel Producers (PALSP) have once more requested the government to help the steel industry overcome this crisis.
PALSP Meeting: The PALSP leadership voiced its opinion during an emergency meeting of the association to address the current crisis-like situation. Imports of scrap in December were only $100 million, hardly 2% of Pakistan’s total import bill, whereas the restriction on scrap imports would result in loss of at least 7.5 million jobs due to the shutting down of cement, cables, tiles, and allied construction industries.
The steel industry expressed deep worry about the current industrial and economic situation, which is characterised by declining foreign reserves, restrictions on LCs, continuous depreciation of the rupee, intense inflationary pressure, liquidity crisis, and significant increase in the cost of production.
It is pertinent to note that local dispatch of cement is down by only 9% y-o-y for the month of December (3.67 mnt), whereas imports of steel scrap stood at 2.75 mnt during the January-November period, a 26% drop compared to 3.72 mnt in the year-ago period.
Impending threat: The top companies in the long steel sector including Nomee Steels, Naveena Steels, Mughal Steels, Amreli Steels, Agha Steel Industries, FF Steels, Faizan Steels, Karachi Steels, Ittehad Steels, Fazal Steels, Kamran Steels, Pak Iron, and Pak Steel attended the conference.
There are 44 allied industries that are dependent on steel supply. Shutting the factories due to non-availability of raw materials would lead to irrecoverable and irreparable damage as a force majeure shutdown would render it impossible to restart the units.
Predictions & possibilities: This means that severe steel shortage shall accrue in February and March. If the State Bank of Pakistan’s administrative restrictions last longer than four business days, steel rebar prices will cross PKR 280,000/t.
However, if raw material imports are administratively restricted, it would cause irreparable harm and irreversible de-industrialisation, the impacts of which would be seen for decades to come.
Massive power outage: Major cities including Karachi, Islamabad and Lahore were all affected by a major power outage that occurred in many regions of Pakistan this morning. The nation’s Ministry of Energy reported that “the system frequency of the National Grid fell down at 7:34 this morning, triggering a broad disruption in the electrical system.” The Ministry added that the system maintenance project is moving quickly.
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