Pakistan Steel Mill (PSM) has renewed its efforts to purchase coal and iron from Balochistan to cut its expensive imports of these raw materials. However, the question arises: why local iron and coal was not used by the PSM in the past ?

Bolan Mining Enterprises (BME) — a joint venture of Balochistan, the federal government and the PPL — is the lease holder of 50 million tons of magnetite iron deposit at Chigendik and Pachinkoh in Chagai district.

When this scribe asked BME about the PSM’s latest offer for buying iron ore, its resident manager (Quetta), Mr Shamim said: “We have yet to receive such an offer”.

He recalled that a few years back, a deal was finalised between PSM and BME for the supply100,000 tones per year iron ore to Pakistan Steel. The PSM had then blended 10 per cent of local ore with the imported ore to produce sinter and pig iron.

In 2003, Mr.Shamim says the BME had supplied 100,000 tons of iron ore from Dilband mine in Mastung to PSM, but the iron proved to be of low grade. “We have not been supplying iron to PSM since then”, he said. A feasibility study about ore deposits at Nokandi area was underway. “The indigenous resources need to be developed and upgraded through beneficiation plant so that they could replace the high price imported iron”, he added.

The BME has been exploring possibilities for upgrading its iron ore through beneficiation process and it recently signed an agreement with a German consultant to carry out engineering studies for setting up such a plant. According to one assessment, iron ores found at Nokkundi and Chaghi have 64 per cent content of iron. Investments can be made for producing sponge iron by direct reduction process using iron ores from these areas.

Iron ore deposits are found at Dilband, Chilghazi, Lasbella, Nokkundi and other areas of district Chagai.

For the supply of iron ore, Pakistan Steel has negotiated with a Chinese company, the Metallurgical Corporation of China (MCC) and the Pakistan Mineral Development Company. The Chinese company is already the lease-holder of copper and gold mine at Saindak in district Chagai.

Under the proposed deal, the Chinese company will set up a plant from its own resources to extract iron ore and the ore supply is expected to begin from April 2008.

Pakistan Steel Chairman Muhammad Javed told a workshop participant in Lahore on Friday that PSM will sign an agreement on January 29 with Chinese company to buy 50,000-60,000 tonnes of iron ore. He said the purchase of 15,000 tons from Chagai had also started on a experimental basis which could be enhanced to 150,000 tonnes.

Pakistan Steel also plans to purchase 60,000 tons of coal during the current financial year from Balochistan. Over the last five years, coal demand increased by 400 per cent. Currently the local coal is being sold at a rate of Rs3000-4000 per ton, while imported coal costs between Rs6000-10000 per ton, says a trader.

Balochistan possesses huge reserves of coal at Hamai, Degari, Mach, Ziarat, Chamalang and Abegum (Table-1). The estimated reserves of coal fields in the province are 217 million tons. The 60km-long Chamalang mines produce good quality of coal ranging from high volatile C bituminous to high Volatile A bituminous with a total reserve of six million tons. Over 80 per cent of the local coal is utilised by bricks makers, while the rest are being consumed by cement plants for blending it with imported coal to reduce the cost of production.

A local businessman dealing in coal mining told this scribe on the condition of anonymity that Balochistan government provides subsidy to coal mine owners who pay only Rs100 a ton as sales tax when about 15-18 per cent a ton of coal is required to be paid as sales tax. He said, “If local mine owners supply coal to Pakistan Steel, they have to pay15-18 per cent a ton as sales tax to the government. Hence it is not cost-effective to them and they prefer to sell coal to the cement sector or brick makers.

In reply to the question as to why indigenous coal is not used by the PSM he said: “Technically, it is not feasible for Pakistan Steel to use Balochistan coal with larger sulphur content as it gathers in various parts of boiler. On the other hand,it is no longer cost-effective for the Pakistan Steel to continue relying on imported coal, as its price has increased in the international market. What is feasible to mix the cheap local coal with the imported one, hence the Pakistan Steel has planned to buy Balochistan coal, he added.

Moreover, there is a strong lobby that fiercely resisted the use of indigenous iron or coal and other inputs as that would slash their business. Appropriate technology can make relatively cheaper steel available for export and for use in the local market for construction, manufacturing, engineering and automobile sector.

Balochistan’s Dilband reserves of over 200 million tonnes contains between 30--40 per cent iron, as against 60 per cent used by PSM. Similarly, the local coal has more sulphur content than the required level. Steps need to be taken for establishing “beneficiation” plants for iron ores and ‘de-sulphurisation” plants for coal.

Table:1

Coal resources in Balochistan

Deposits Coal Resources

(Million Tons)

Hamai 76

Sor Range-Degari 50

Duki 50

Mach-Abegum 23

Pir Ismail Ziarat 12

Chamalang 6

Sub-Total 217

Table: 2

Significant iron ore deposits

in Balochistan

Deposits Size

(Million Tons)

Dilband 200

Shekran 10

Chilghazi 23

Kundi Baluchap 0.13

Pachin Koh 45

Durban Chah 1.125.