THE governments in the past had not acted appropriately either as a regulator of steel industry or as an investor in the Pakistan Steel Mills. They failed to take note of the declining trend in efficiency of the integrated steelmaking facility, considered as a backbone of infrastructure of any country. This was the conclusion reached by the Task Force on PSM in December 1997.

Interestingly, a delegation from Nippon Steel of Japan had proposed that the only way to make the PSM viable was to scrap the whole steel mills and to build it anew based on modern technology.

The BMRE scheme for the Pakistan Steel, which had commenced commercial operations at all its sections only during 1985-86, has a chequered history. For almost two decades, the PSM had plans to undertake major revamping of mills and expanding its production capacity to three mtpy in phases. A number of technical and commercial exercises were done during this period, but without achieving any tangible physical progress.

Detailed studies were conducted by global experts. Technical and commercial proposals were made by Russians, Chinese and the western sources in the past. MOUs were signed with China and Russia at the ministerial levels and financing was offered by the Chinese. Nothing however materialised.

The PC-1 of the BMRE was initially prepared in 1993, which could not be implemented. Revised feasibility study was then conducted only for BMR, which was approved by the government in 1998 but again work was not initiated. Another scheme was approved in 2002 but nothing happened. However, major capital repairs of blast furnace and other equipment were undertaken, followed by revamping of bloom caster and other installations.

In June 2003 Tyazhpromexport, the principle Russian company that constructed the existing mills, was engaged by the PSM to prepare basic design solutions (BDS) and detailed engineering for modernisation and expansion up to 1.5 mtpy. However, a plan was presented to government in October 2004 to address operational issues of major repairs and refurbishment of mills at a cost of Rs5 billion that would have also enhanced capacity to 1.3 mtpy, for which provisions were already available in the original design.

This programme was implemented for BMR of coke oven batteries, hot strip mill, billet mill, sintering plant, oxygen plant, slag processing plant and allied equipment, by various Russian and Chinese companies, though not done in an integrated and systematic manner.

The work was stopped half-way in 2006 as a result of PSM's on-going privatisation process, though it was claimed that major capital repairs were undertaken and capacity increased to 1.3 mtpy.

As its sell-off plan was put on hold, efforts were made again in 2008 to re-start the un-finished work at the PSM but without much success. Thus, the partial BMR undertaken could not yield desired results. Nonetheless, in the process, plant condition further deteriorated impacting grossly on its operational performance. Recently the BMRE plan has been launched afresh. The PSM has invited expression of interest (EOI) for “Restoration of the existing plant, equipment and facilities of the mills and the expansion of its production capacity from existing designed capacity of 1.1 million tons per year (mtpy) to 1.5 mtpy (Phase-I) and up to three mtpy (Phase-II), on turn-key basis”. Last date for receiving EOIs was October 27.

In response, the PSM has received EOIs from ten global companies, including Tyazhpromexport of Russia, China Metallurgical Construction (Group) Corporation (MCC) of China, ThyssenKrupp Technologies of Germany, Voest-Alpine of Austria and others. Tyazhpromexport and MCC had presented technical and commercial proposals in the past too, whereas Voest-Alpine had given technical offer for capacity expansion plan.

The BMRE is expected to cost $ 2.2 billion, which cannot be arranged by Pakistan under the prevalent economic conditions. It is expected that the selected foreign company would be asked to arrange either equity investment or funding under suppliers' credit or foreign government's loan to cover foreign exchange element of project. The process of award of contract may take six months, whereas completion period is projected to about two years for phase-I and another three years for second phase. The BMRE plan on its implementation is aimed at transforming PSM into modern, energy-efficient and profitable entity. Employing latest advanced steelmaking technology is, however, considered key to success.

There is also a need to achieve optimum indigenisation in its implementation for which technology transfer from the selected company is imperative. It should be a prerequisite for the contracting company to fully utilise potential of indigenous resources of design, engineering, manufacturing, technical services and project management.

Growth in steel demand is expected to increase world-wide, despite recent economic crisis, estimated at a record of 1.34 billion tons in 2011. Pakistan, currently having one of the lowest per capita consumption of steel in the region, has annual consumption of about five mtpy. Timely completion of BMRE project and acquisition of technology will allow the PSM to effectively contribute towards meeting growing steel demand domestically.