Robust activity shown by automobile sector and construction industry in the last one year has led to 33 percent phenomenal jump in steel requirement of the country.
Total steel requirement of the country, which stood at 3 million tons per year (mtpy) a year ago has now swollen to 4 mtpy which is expected to grow further with the passage of time and a sharp increase may come into effect as soon as growth in industrial/engineering sector attains its required pace.
Contrary to this ever-increasing domestic steel demand, the present capacity of Pakistan Steel (PS) is only 1.1 mtpy, despite having a built-in potential for expansion up to 3 mtpy, which is quite inadequate to meet the total domestic requirement of steel. With this capacity, contribution of PS in domestic market is hardly 25 to 30 percent, while the rest of the requirements are met either through ship-breaking/scrap/local steel melters, or imports.
In this perspective, PS intends to embark upon an expansion plan of its capacity from present 1.1 mtpy to 4 mtpy in one go. Besides appointing AKD Securities as its financial consultant for raising the required capital and working out the proper utilisation of available fund, recently the corporation has also short-listed Corus, a UK based internationally reputed consultancy firm, as its technical consultant for this purpose.
Pakistan Steel Chairman Abdul Qayyum expressed these views, while talking to Business Recorder on Wednesday. When asked about the earlier deal with Russia pertaining to the initial phase of capacity expansion programme from 1.1 to 1.5 mtpy, he said that though an MoU had been signed with Russia last year, the agreement could not be realised because of financial constraints.
Now PS is looking for a deal on government to government level with Russia, China or Ukraine from 1.1 to 4 mtpy in one go through that country's credit.
About Japan based company Marubeni Corporation's offer for soft credit yen loan to PS he said that any such offer could only be accepted after going through thorough study of its four important aspects ie either the loan was free of interest, on marginal or commercial interest, time-frame for repayment and if any barter could be arranged against the repayment.
He also rejected the possibility of floating of PS shares in the stock market in near future, saying that this option, too, would only be exercised after working out the exact proposition and amount required for the expansion plan, besides rescheduling of the corporation's accumulative losses of around Rs 7 billion.
Highlighting the present achievements of the corporation he said that in the first nine months of the current fiscal year (July 2003 to March 2004) PS had achieved highest sales of Rs 18.3 billion. Average capacity utilisation was 97 percent till January 2004, but the production had to be reduced to 59 percent in February and March 2004 due to raw material crisis in international market.
However, after successfully overcoming the crisis and securing its fresh supplies of raw material, PS had achieved phenomenal capacity utilisation of 107 percent during the first two weeks of May 2004.
He added that a net profit of Rs 2.966 billion had been recorded up to March 2004, which was expected to cross the figure of Rs 4 billion at the end of the current fiscal year, breaking all previous records.
On the recent steel crisis, he observed that since the international situation had eased out to a considerable extent and PS had procured the raw material for the next nine months, or so, there was no imminent danger that it might hit the industry.
However, he said that despite the reduction in import duty on steel billets the landed cost of imported billets would come out to be more than the locally manufactured one.
He said that due to shortage of steel billets only one company which was too below the mark turned up to PS tender and therefore it was likely that PS might re-invite tenders for this purpose.
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