A 10-member delegation of Al-Tuwairqi Group of Steel Melting Industries of Saudi Arabia finalised plans for the establishment of a sponge iron steel mill with a capacity of one million tonnes per annum, adjacent to the Pakistan Steel Mills, Karachi.
The total cost of the project has been estimated at $100 million in which Al-Tuwairqi Group will make equity investment to the extent of 55 percent while Pak-Kuwait Investment of Karachi will be holding 15 percent shares.
The remaining 30 percent equity capital, according to plans, will be offered to other investors in Pakistan and Gulf states.
Although the pre-investment study of the project is yet to be completed over the next couple of months, the ground breaking ceremony of the project is planned for 15th March next.
The project is entirely export-oriented which is also indicated by the facilities and incentives accorded to the project on a par with those permissible in an Export Processing Zone.
The project is likely to be completed and commissioned over the next one and a half years.
The target date is likely to be met if seen in the context of the government's all-out support to the project's implementation.
The Secretary to the Ministry of Industries and Production, Javed Ashraf Hussain, actively co-ordinated the meetings in Karachi with agencies like Sui Southern Company, Karachi Electric Supply Corporation, Karachi Water and Sewerage Board and Karachi Export Processing Zone Authority with a view to ensuring timely and unhindered supply of gas, power and water according to the requirements of the project.
The gas supply will be in the region of 40 million cft/day for use as fuel in the mill while an additional quantity of 40 million cft/day will be made available to the sponsors for the establishment of a power generation plant of 120 megawatts which will make the project self-reliant in power supply.
Foreign investment to the extent of $100 million in the steel mill and an additional $100 million for the establishment of power generation plant is undoubtedly a highly welcome development against the backdrop of the country's urgent need to attract foreign private investment in the manufacturing sector.
It is further encouraging to note that the project is going to be export-oriented as the entire production of billets is expected to be exported, most likely to the Gulf countries.
It may be pointed out here that Pakistan is already short of locally produced steel to the extent of 50 percent of requirement, and imports have to be resorted to besides the local supply from Pakistan Steel Mills.
The project is thus likely to herald Pakistan's debut into the international steel market as an exporter. However, the world steel market is already thick with tough competition and it will take efficient management for the upcoming project to be able produce billets at a cost comparable with the international prices.
It may be expected that tax incentives, including duty-free import of raw materials for the project located in the Export Processing Zone, would make it possible to compete successfully in the international market.
It would appear that the relatively fast appearance of the project in Pakistan's Steel sector is likely to overshadow Pakistan Steel's impending expansion to double its capacity to two million tonnes over the next couple of years and ultimately to three million tonnes annually.
Offers from Russia and China to participate with loan financing in the expansion plans of the Pakistan Steel, are reported to be already under negotiation. It may be expected that these offers will be accepted and put through as early as possible.
The proposed expansion would not only make the steel mill an economic-size unit but would also result in import substitution.
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