LAHORE, Feb 27: The crisis in the domestic steel market will not last for long and prices will eventually stabilize. This was stated by Pakistan Steel Mills Chairman Lt-Gen Abdul Qayyum (retired) while speaking at a meeting of the steel mills dealers here on Friday.

The Chairman said that crisis in the domestic steel market was part of a larger crisis prevailing in the world market for the last few months. He said the crisis had started as a result of discontinuation of the hard coke and iron ore exports by China and starting of imports of the same instead.

He said that China was exporting 70 percent of its iron ore and hard coke till it decided to discontinue exports and start imports to increase its steel production capacity from 220 million tons to 260 million tons per annum last year for meeting its domestic requirements.

Raw material prices had increased by 200 to 300 percent in the international market because China discontinued exports on the one hand and Saudi Arabia decided to establish a steel mills with four million tons capacity and Turkey and India to raise production to eight million tons and 32 million tons per annum, respectively.

He said the steel mills had to pay Rs840 million extra to shipping companies as they expressed inability to continue their services against 40 million dollar per annum freight contract in view of 100 percent increase in rates in the international market and asked for confiscation of their two million dollar security.

As many as 28 suppliers participated in the international raw material supply tender last year and agreed to supply it for 32 dollar per ton. Only five suppliers came forward for raw material supplies this year and obliged the steel mills by agreeing to supply the raw material at 64 dollar per ton instead of 45 dollar.

The Pakistan Steel, he said, was meeting 33 percent of the domestic demand despite 97 percent capacity utilization. The remaining demand was being met by import of scrap and shipbreaking industry.

It had now decided to raise its production capacity from 1.1 million tons to three million tons per annum. He said a Russian delegation had already reached the country to hold talks in this regard.

China had offered soft loan equal to 85 percent of over one billion dollar expansion cost. A Saudi investment group had also arrived for setting up a mills with one million tons per annum capacity near the Pakistan Steel with dollar 100 million investment. He said that he had decided to monitor the production and supplies personally.