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Pakistan Steel production cycle comes to a halt

Updated September 17, 2013
According to a PSM executive, two major production units of coke oven byproduct plant (COBP) and blast furnace are facing acute raw material shortage and second battery has been shifted to heat cycle due to shortage of coal feedstock.  — File Photo
According to a PSM executive, two major production units of coke oven byproduct plant (COBP) and blast furnace are facing acute raw material shortage and second battery has been shifted to heat cycle due to shortage of coal feedstock. — File Photo

ISLAMABAD: The production cycle at the Pakistan Steel Mills — the country’s largest industrial complex — appears to have come to a halt, mainly because of non-availability of raw material and severe financial crunch.

According to a PSM executive, two major production units of coke oven byproduct plant (COBP) and blast furnace are facing acute raw material shortage and second battery has been shifted to heat cycle due to shortage of coal feedstock.

Non-availability of coke to charge the blast furnace will adversely affect productivity of hot metal required to feed the steel-making unit which caters to the rolling mills to make value-added products. “This is going to further damage the condition of batteries and their production parameters.”

He said the first COBP battery had already been on heating since November 2010 without production, incurring millions of rupees per month.

In the first half of this month, the production of coke oven battery stood at just 5,000 tons against its capacity of 80,000 tons per month. Total coal stock now stands at 800 tons against the minimum requirement of 300,000 tons of ready stock under standard operating procedures.

As a consequence, the production of blast furnace stood at 6,000 tons against its monthly capacity of 100,000 tons, due to coke shortage.

Raw steel production stood at about 4,500 tons against the monthly capacity of 91,000 tons.

There is no production of hot strip mill. The billet mill has been closed for the past four years and the billet caster has been out of order for more than three and a half years.

The cold rolling mill’s production was 1,200 tons against the monthly capacity of about 17,000 tons.

Total sales in the last 15 days amounted to a negligible Rs440 million.

“As of today, we neither have any raw material inventory nor saleable stock. Practically, the PSM stands closed even though its major batteries are kept on heating to avoid a technical closure – a stage when the mills cannot be revived,” the official said.

He said the government during its first 100 days had neither inducted a professional management nor changed the board of directors in a transparent manner to take steps to revive the mills that catered to the country’s steel industry.

Officials said the backbone of steel industry was on the verge of collapse and yet it had not been able to attract attention of the new government under whose rule it had already suffered an additional loss of Rs7 billion.

Over the past five years, the PSM has suffered a total loss of about Rs200bn.

“The PSM reached this state due to unchecked corruption, inefficiency, over-employment and government’s lukewarm attitude towards its revival,” a summary of the industries ministry says. Yet no action has been taken to stop the rot.

Last month, the ministry sought the government’s intervention, suggesting four options regarding revival, liquidation, privatisation and closure.

The ministry believes an upfront injection of Rs28.5bn could revive the mills, while its closure would need Rs57bn to clear its liabilities. The summary was rejected by the cabinet’s Economic Coordination Committee.

On Sept 8, the ECC agreed to sanction Rs2.9bn to pay three-month salary of employees but the amount had not yet reached the PSM, an official said.

As things stand now, the PSM’s equity is negative to the extent of Rs200bn (Rs90bn liabilities and Rs110bn cumulative losses), including over Rs45bn bank loans, gratuity, provident fund and outstanding dues of the Sui Southern Gas Company.