PSM revival deal

The recent agreement between Pakistan and Russia to revive the Pakistan Steel Mills (PSM) is cause for cautious optimism, as it could mark an industrial reboot and a strategic realignment. The deal agreed in Moscow would transform the defunct Karachi plant into a modern metallurgical hub. This collaboration, echoing the mills' Soviet-assisted origins in the 1970s, could catalyse Pakistan's industrial resurgence while redefining Eurasian partnerships.

PSM was originally set up with Soviet assistance and was regarded as a symbol of bilateral solidarity. However, despite its potential, the facility was plagued with problems from the beginning and was loss-making for most of its history. Government support was the only reason it sputtered along until 2015, when it was closed for cost taxpayers billions of rupees a year in subsidies.

The revival plan would see Russia commit to dismantling obsolete infrastructure and constructing a "state-of-the-art facility" on 700 acres of the existing site, with additional land earmarked for an industrial park. Technical teams have already inspected the premises, and a detailed roadmap is underway to forge a "stronger industrial future".

However, without properly studying market dynamics, a revived mills could turn into an even whiter elephant. Keep in mind that, for better or worse, we are located right next to China, one of the world's most cost-effective sources of high-quality steel.

To succeed, the new PSM would have to compete with Chinese producers on both price and quality, which seems an uphill task. Conversely, the government could use tariffs to protect it, but this would hurt Pakistani consumers and could offend the Chinese. But there is still hope that even if it cannot compete with China on price, industrial renewal could trigger enough demand for steel that PSM could feasibly reach high sales levels and remain profitable by carving out its own market niche. All that is needed is professional management and foresight.