CCP recommends restoration of DSFL operations

The Competition Commission of Pakistan (CCP) has strongly recommended that the operations of the Dewan Salman Fibres Ltd should be restored, as it holds about 40 percent of the total installed Polyester Staple Fibre (PSF) production capacity.
According to the CCP competition impact assessment report on the PSF issued on Wednesday, the closure of the Dewan Salman PSF unit is a setback for the industry and PSF users. Dewan Salman Fibres Ltd holds about 40 percent of the total installed PSF production capacity. This unit needs to be put back into operation.
The report said that the major PSF producers are Ibrahim Fibers Ltd, ICI Pakistan Ltd, Pakistan Synthetics Ltd, Rupali Polyester Ltd and Dewan Salman Fibers Ltd. However, presently only 4 units are operational as Dewan Salman Fibers Limited (DSFL), a former market leader, has ceased operations.
The closure of DSFL was primarily triggered by a financial crisis faced by the industrial group that owns the unit. This led to operating losses, shut down of plant operations due to non-availability of working capital. The situation was further exacerbated by rising raw material prices and the Rupali Pvt Ltd and Pakistan Synthetics Ltd are smaller players with capacities of 24,000 and 28,000 Metric tons (MT) per annum respectively. Rupali Private Ltd also produces yarn and most of its PSF production is utilised for its own yarn production.
Dewan Salman became the largest PSF manufacturer with an installed capacity of over 260,000 MT when it acquired Dhan Fiber in 2000. Ibrahim Fibers increased its installed capacity of 208,600 MT. ICI is the third largest producer with an installed capacity of 122,000 MT. As a result of Dewan Salman shutting down, the ranking has altered and Ibrahim Fibers has emerged as the market leader and ICI is now the second largest producer.
Factors that affect the domestic production of PSF include local demand, price of imported PSF and costs related to business and manufacturing. Domestic PSF production declined by 15% during the last 5 years. The PSF industry is of the view that the cost of doing business has increased manifold, cheap imported PSF is available from various countries and the closure of Dewan Salman Fibres Ltd have all contributed to a decline in domestic production from 426,342 MT in 2004-05 to 364,354 MT in 2008-09.
Amongst the local players, Ibrahim Fiber Ltd has emerged as the largest PSF producer. Its production increased by 59 percent during last 5 years. Contrary to this, during this time, the production of Dewan Salman declined by about 15 percent and eventually its unit was shut down in 2008, the CCP report added.