PSM demands punitive duties on steel imports

Cheap imports from China are one of major reasons for mill’s collapse


Zafar Bhutta February 06, 2016
According to the Rs18.5 billion bailout and turnaround plan for PSM approved in April 2014, the industries ministry was supposed to help the mill hit 60% production capacity by November 2014. PHOTO: FILE

ISLAMABAD:


Pakistan Steel Mills (PSM), in a petition, has asked the National Tariff Commission to slap anti-dumping duties on cheap steel imports that have flooded the market and are among primary reasons for the collapse of the giant industrial complex, officials say.


After missing the deadline to revive the steel mill, officials of the Ministry of Industries and Production appear convinced that the real reasons for the mill’s hefty losses are not only its operational challenges, bad management and poor plant maintenance, but also the competition with cheap steel products of China.

Steel mills told to lay off daily wage-earners

By citing this reason, the officials are apparently trying to deflect attention from their inability to help the ailing state-owned mill stand on its feet.

In a meeting of the Economic Coordination Committee (ECC) on March 19 last year, officials of the Ministry of Industries had held the Pakistan-China free trade agreement, implemented from 2007, responsible for the financial collapse of PSM.

Despite making the claim, they acknowledged that the real reason behind failure of PSM to meet its capacity utilisation targets was the forced closure of one of its plants due to poor maintenance.

In another meeting held on January 29 this year, the ECC issued directives for coming up with a report on the outcome of the petition filed by PSM with the National Tariff Commission that called for imposition of anti-dumping duties on cheap imported steel products.

The Privatisation Commission told the ECC that PSM’s liquidity position had deteriorated as the mill had found it difficult to dispose of its finished goods inventory, which was worth Rs388 million.

However, the inventory of unfinished goods valuing Rs4.6 billion could only be sold after gas supply was restored and they were converted into finished products.

Sindh looks for more time to decide on PSM acquisition

The ECC was told that PSM employees had not been paid salaries for the past three months and the current finished inventory was not sufficient to meet day-to-day expenses including staff salaries.

The committee noted that operations of the steel mill had almost come to a halt and its financial condition was deteriorating. It called for curtailing non-obligatory expenditures being made on salaries of contract employees and daily-wage earners.

PSM, which had been embroiled in corruption scandals in the past, comes within the purview of the industries ministry and is on the government’s privatisation list. It is the only steel mill in Pakistan that has the ability to produce raw steel from iron ore.

Earlier, attempts to sell off the mill were abandoned in 2006 following a Supreme Court judgment that the process lacked transparency.

The industries ministry had been tasked with increasing the mill’s production capacity utilisation to 77%, a level where it would reach breakeven, by January 2015 and then it would be put up for sale.

According to the Rs18.5 billion bailout and turnaround plan for PSM approved in April 2014, the industries ministry was supposed to help the mill hit 60% production capacity by November 2014.

However, it failed to do so because of unexpected shutdown of the mill in the face of poorly maintained infrastructure.

Published in The Express Tribune, February 7th, 2016.

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COMMENTS (6)

Murtaza | 5 years ago | Reply The Chinese steel mills are mostly state owned. They can sell at an even lower price if they have to. The government there considers these industries a form of social security for the people that are employed there.
cautious | 5 years ago | Reply China is suppose to be your best friend -- but you don't share religion, language, culture, and Pakistanis aren't really welcomed in China (almost no tourist trade between two countries). China dumps steel and a thousand other products in Pakistan - only item it buys from Pakistan of substance is low margin yarn which it turns into high margin textiles to compete with Pakistan in Int trade. China loans billions to Pakistan - but requires Pakistan to hire Chinese firms under "no bid" arrangements. Lastly China openly persecutes Muslims while Pakistan sits around mute afraid to even utter a complaint. With friends like that - who needs enemies.
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