The present management is giving practical shape to the expansion plan


Apr 19 - 25, 2004





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 of crisis.

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.