Dollar shortage bites, steel-maker temporarily shuts operations

Beco Steel Limited, formerly Ravi Textile Mills Limited, on Friday announced it was going to shut production on a temporary basis, citing inventory shortage and inability to secure Letters of Credit (LCs).

The development comes as a number of companies in recent days have said they will either limit or suspend production activity, citing various issues ranging from economic slowdown to supply chain disruptions.

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“Due to delays in LC approval and significant reductions in inventory levels, which have a negative impact on the supply chain and production activities, the company has decided to temporarily halt production activities from January 16, 2023 and continuing until further order,” said the company in its notice to the Pakistan Stock Exchange (PSX).

Beco’s plant, with total melting capacity of 99,400 metric ton and re-rolling capacity of 99,000 metric ton, is based in Lahore. The mid-country location allows the company to service both central and northern Pakistan and export to Afghanistan, it says.

Industrialists from various sectors including pharmaceutical and edible oil have expressed concern over their inability to import raw material as banks are not opening LCs because of a dollar shortage.

On Wednesday, Governor of State Bank of Pakistan (SBP) Jameel Ahmad assured the business community of resolving the issue of restrictions on dollar soon, as manufacturers projected dim prospects regarding industrial production if import of raw materials remains blocked.

The governor urged businesspeople to come up with practical proposals aimed at minimising their problems.

He said that the SBP will hold a meeting with representatives of the Federation of Pakistan Chambers of Commerce & Industry and Karachi Chamber of Commerce & Industry on 18 January to look for ways to solve issues faced by the business community. “I am personally very worried over the situation,” he remarked.

The country has limited resources, with more issues popping up on the foreign exchange side, said the SBP governor, but was hopeful that the situation will improve once inflow of forex begins.

Last month, SBP decided to withdraw the restrictions placed on imports with effect from January 2, 2023.

The central bank said that Authorised Dealers (ADs) may prioritise or facilitate imports under essential imports, energy imports, imports by export-oriented industry, imports for agriculture inputs, deferred payment / self-funded imports and import for export-oriented projects near completion.