ISLAMABAD, June 2: An Austrian company has offered to expand the Pakistan Steel from 1.1 million tons per year to 1.5 million tons and consequently to 3 million tons per year at a very competitive price provided an open opportunity was given to all companies to compete.

The offer by VA Tech Group of Austria, one of the leading engineering and steel designing consultants of the world, has come at a time the Pakistan Steel has already constituted a seven-member committee for price negotiations with Tyazhpromexport of Russia without open tender, sources told Dawn.

Documents provided to Dawn by a senior official in the ministry of industries said a related offer by a Chinese firm to extend $700 million credit for the expansion of the PS was also not under serious consideration at the first phase of expansion.

The sources said expansion of Pakistan Steel below 2.2 million tons production was not at all feasible as its basic design was based on 2.2 million tons production per year. They said that for the first time in many years, the PS has now crossed the break-even stage and that too because it was being run at 98 per cent capacity utilization.

These sources said none of the steel mills around the world were run at more than 90 per cent plant utilization because then it starts extra expenditure on maintenance.

The detail project report (DPR) of Pakistan Steel states that “in compliance with the customer’s memorandum of instructions while designing the general layout and the main plants and services the DPR has provided a possibility for nearly doubling the capacity of the PS in future”.

The design and drawing provided by Lengipromez, the designer of the PS, confirm

the description of DPR because provisions envisaged for expansion of the plant to double its capacity i.e. from 1.1 million tons to 2.2 million tons have been clearly indicated on project drawings of the various complexes.

“Furthermore, it is internationally accepted that integrated steel plant like PS of capacity less than 2 million tons per year production is not economically feasible and as such minimum size of such type of integrated steel plant conforming to various international standards is not less than 2 million tons per year”, the DPR said.

M/s Lengipromez, therefore, have designed this plant for 2.2 million tons capacity but at the first stage of construction the capacity of the plant had been limited to 1.1 million tons per year by limiting certain equipment at various complexes of this integrated plant. As such infrastructure available and other facilities and services will be made suitable by minor improvement in certain areas for the plant of 2.2 million tons capacity.

The DPR says: “It reveals that Pakistan Steel has already made reasonable investment at the first stage of construction in view of future expansion of the plant to double its capacity. This initial investment made by the PS to keep the provisions in the design for second stage expansion programme is still stuck-up and as such it is causing permanent financial losses to PS”.

The VA tech, said these sources, has designed and completed 800 major steel mills projects in more than 80 countries which covers 70 per cent steel production of the world. The company is pioneer of the technological process of the latest iron and steel production like Corex and Direct Reduction Process. It also discovered LD Converter technology which was later adopted by Russians and the other countries.

The VA Tech has offered a financial package for the expansion of Pakistan Steel which is to be paid back in Pakistan rupees through buy back products of the PS at international market price to facilitate the government to help reduce foreign exchange burden on the country.

In a letter to the prime minister, the company has pointed out that PS has not responded to their offer notwithstanding the fact that the company was already engaged in supply and installation of continuous billet caster and revamping and modernization of both machines of sintering plant of the PS.

The company has asked the prime minister to constitute a high-level committee to examine all the proposals coming from various companies, compare them on apple-to-apple basis and then take a decision on technical-cum-financial basis in the interest of the Pakistan Steel and the country.