Pakistan Steel, country's largest steel making
project, has started picking up financially as the pre-tax profits for
the current financial year ending June 30, 2004, are estimated at Rs2.5
billion which is a milestone in his history of the project.
In fact, Pakistan Steel has gone through financial
crisis since its inception because of excessive politicization and gross
mismanagement by the corrupt people at the helm of affairs most of the
time. Different political governments as well as managements inducted
people into corporation at a massive scale purely on political
considerations. Induction of unskilled manpower by every government in
the past impaired the economics of the corporation which obviously put
this national complex under heavy debt of the banking sector. According
to an estimate, the corporation owed to pay a huge amount of Rs19
billion to the banking sector.
However, corrective measures, though harsh including
large scale retrenchment of workers, taken during the last three years
have not only helped reducing the losses but also enabled the management
to retire a huge amount of Rs12 billion which provided cushion to the
managers to convert the mill from a loss making entity to a profit
earning concern. The mills still owe an amount of Rs7 billion to the
banking sector to clear its financial profile. However, the present
Chairman Gen. Abdul Qayyum, having a rich experience of running huge
organization like Wah Ordnance Factories and also a good name for his
conduct with the manpower has the ability to steer this huge project out
The development activities all over the country have
created unprecedented demand for steel products. With the increase in
demand for steel products on one hand and short supply on the other hand
has naturally resulted in abnormal increase in the steel prices
recently. The steel prices, especially the iron bars had jumped to the
extent of Rs 60,000 per ton as against Rs38 in just two months.
Actually, Pakistan Steel having an installed
production capacity of 1.1 million ton is unable to meet the entire need
of the country which is estimated at over 4 million tons a year and is
likely to further grow due to rapid increase in developmental activities
not only in Pakistan but in the entire Asian countries.
China, which currently engaged in developing three
gorgeous dams because construction of the Olympic City, as it is the
host of the next Olympics, has almost swept the entire steel material
from international market to meet its requirements. This vacuum in the
international steel market created by huge lifting by China was the real
factor because increase in the steel prices. Another factor which
aggravated the price situation was the exorbitant increase in freight
charges from $15 to $50 per ton. The liners had their own reasons
especially the increase in fuel prices.
The chain effects of the increasing trend resulted in
increase in prices in Pakistan as well. However, the situation has been
brought under control and the steps taken by the government including
reduction in import duty greatly helped easing the price situation.
Since Pakistan Steel meets only a 25 per cent of the
total demand of the country, the rest is met through ship breaking
industry and other re-rolling mills and foundries.
The duty on import of iron ore and other steel
products was levied to protect the Pakistan Steel. However, credit goes
to the present management which itself suggested for reduction in import
duty so that the problem of short supply could overcome by remaining
players in the steel industry.
The present management is giving a practical shape to
the expansion plan of the Pakistan Steel from the present capacity of
1.1 million to 1.5 million tons for which it is seeking technical advice
from international consultants.
Currently, the management is in the process to hiring
technical and financial advisors for assessment of technical requirement
as well as financial implications of the expansion plan. In this
respect, it has approached financial experts locally to prepare
feasibility for making arrangements as the finances for the entire
expansion plan have to be generated by the Pakistan Steel through its
own resources. One of the option before the management for raising funds
is to float its share through the stock market. Earlier the experts as
well as the Ministry of Production and the Privatization was of the view
that unless the loan of Rs7 billion was cleared, the launch of the
shares might not attract the investors. However, in view of the
exceptional financial results produced by the Pakistan Steel and the
existing appetite in the market is encouraging to go for Initial Public
Offering of the Pakistan Steel shares in near future, it is learnt.
Pakistan Steel, according to informed sources, is in touch with the AKD
Securities in connection for launching its shares through Karachi Stock
Exchange. A final clearance from Ministry of Production has yet to come
to move ahead with the plan, sources said.
Since the demand for steel increasing rapidly in
Pakistan, especially due to robust growth of 68 percent in automobile
sector and an equal increase in the construction industry, the sector
offers great opportunities for the investors in this area, experts feel.