Research Analyst
Aug 2 - 8, 2010

Pakistan Steel Mills is the producer of long rolled steel products in Karachi. In May 2006, the government of Pakistan put the mill on auction for privatisation. The consortium involving Saudi Arabia-based Al Tuwairqi Group of Companies submitted a winning bid of $362 million for a 75 per cent stake in PSMC at an open auction held in Islamabad. The consortium of Saudi Arabia-based Al Tuwairqi Group, Russia's Magnitogorsk Iron & Steel Works and local firm Arif Habib Securities agreed to pay a total Rs21.6 billion ($362 million), or Rs16.8 per share, to take control of Pakistan's largest steel manufacturing plant. Supreme Court of Pakistan took notice against privatisation and postponed it for indefinite period.


Today, Pakistan steel is the country's largest industrial undertaking having a production capacity of 1.1 million tons of steel. The enormous dimensions of the project can be visualised from the construction inputs which involve the use of 1.29 million cubic meters of concrete, 5.70 million cubic meters of earth work, 330,000 tons of machinery, steel structures and electrical equipment. It's unloading and conveyor system at Port Qasim is the third largest in the world and its industrial water reservoir with a capacity of 110 million gallons per day is the largest in Asia. A 2.5 km long seawater channel connects the seawater circulation system to the plant site with a consumption of 216 million gallons of seawater per day.


Pakistan steel not only constructed the main production units, but also a host of infrastructure facilities involving unprecedented volumes of work and expertise. Component units of the steel mills numbering over twenty were commissioned as they were completed between 1981 to 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 completed at a capital cost of Rs24,700 million.


2000-01 552 million
2001-02 102 million
2002-03 1.042 billion
2003-04 4.852 billion
2004-05 6.008 billion
2005-06 929 million
2006-07 3.19 billion
2007-08 2.375 billion
2008-09 (22.14 billion)


PSMC's provisional financial documents for the period ending June 30, 2009 reveal that it faced a mammoth loss of Rs22.143 billion during the fiscal year 2008-09 compared to a profit of Rs2.375 billion in the fiscal year 2007-08. During the fiscal year 2000-01, it posted Rs552 million profit, around Rs 102 million in 2001-02, Rs1.042 billion in 2002-03, Rs4.852 billion in 2003-04, Rs6.008 billion in 2004-05, Rs929 million in 2005-06, and Rs3.19 billion in 2006-07. Despite the production and operational losses, the management of PSMC adopted inefficient policies and purchased raw material at higher rates, which raised the deficit.

The PSMC sales had also declined by 18 per cent to Rs33.154 billion in fiscal year 2009 compared to Rs40.624 billion in fiscal year 2008.


The sales of Pakistan steel plunged to Rs21 billion during the first 11 months (July-May) of the 2009-10 from Rs32 billion in the whole 2008-09. The steel maker witnessed a drastic drop in May sales to Rs707.4 million from Rs1.422 billion in April and Rs2.548 billion in March 2010. And, in first five months of 2010, the mill increased prices four to five times.

However, the manufactures were importing material under the concessionary SRO at five per cent and zero per cent custom duty instead of normal 10 per cent. Besides, China was giving export rebate at nine per cent on hot rolled coils and 13 per cent on cold rolled and hot dip galvanised products. In addition, a custom duty discount of about three per cent is also available under Preferential Trade Agreements (PTA) on steel imports from China. All these concessionary rebates including reduced government duties and taxes contribute to very low landed cost as compared to Pakistan steel's prices.

The imports of cold rolled products were also on the rise as about 8,200 tons of these products were imported in April 2010, while in May the imports had been doubled. Same was the case with galvanised products as 4,700 tons were imported in April and over 5,500 tons in May.

The share of Pakistan steel in domestic market of flat products at 70 to 80 per cent capacity utilisation was 49 per cent, 44 per cent, and 15 per cent for HR, CR and GP respectively, but the market share has been completely taken over by the import substitution.

Pakistan steel was requiring 1.5 to 1.7 million tons per annum of iron ore at 80 to 90 per cent capacity utilisation but now the situation has changed for the last six to eight months as only 40,000 tons per month have been arriving mainly from Iran.


The management of Pakistan steel is striving hard to harness each and every source to enhance its production capacity and sales of Pakistan steel products at competitive prices to international market. The steel manufacturer has geared up its procurement of iron ore and coal, which are essential bulk material for iron and steel production.

Pakistan steel has requested the ministry of industries and production and ministry of finance for a bailout package of Rs25 billion to run the mill efficiently and to pay off financial liabilities.