The Pakistan Association of Large Steel Producers (PALSP) has once again requested the government to assist the steel industry in overcoming the crisis caused by the letters of credit (LCs) problem.
During an emergency meeting of the organisation to address the current crisis-like situation, the PALSP leadership expressed their opinions. Members voiced concern that if the issue is not handled within four working days, it could lead to indefinite factory closures, major deindustrialization, and the loss of up to 7.5 million jobs.
The leadership of the steel industry expressed grave concerns about the current industrial and economic situation, citing diminishing foreign reserves and restrictions on letters of credit, continuous rupee depreciation, tremendous inflationary pressure, liquidity crunch, and a significant increase in production costs.
It was discovered that 44 ancillary industries are dependent on steel supply. Closing the factories owing to a lack of raw materials would cause irreparable harm to the steel industry, as it would be impossible to restart the affected units once the plants enter force majeure closure.
The import of steel scrap decreased by a record 55 percent year-over-year (191,000 MT) in December, the steepest year-over-year decline in the previous ten years.
Due to this, the steel sector has warned of significant steel shortages in February and March. Further, they cautioned that if the administrative limits imposed by the State Bank of Pakistan (SBP) persist longer than four working days, the price of steel rebar per tonne will surpass Rs. 280,000.
Imports of scrap for December 2022 amount to only $100, or less than 2% of Pakistan’s overall import bill, whereas a ban on scrap imports will result in the loss of at least 7.5 million jobs owing to the closure of cement, cable, tile, related, and construction industries.
The meeting was attended by 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, among others.