Abbas Steel to process 80 kilotons this year

KARACHI: Abbas Steel Group bought 79,742 tons of raw material for production in the period from July 2009 to June 2010, according to provisional figures provided by officials to The Express Tribune.

Only 23 per cent of their total raw material was purchased from the Pakistan Steel Mills (PSM). They purchased 18,352 tons of steel from PSM, 50,756 tons were imported and 10,633 tons were bought locally from other mills.

PSM production had been stopped during the period from November 2009 to April 2010 due to a shortage of raw material. Thus, the rest of their raw material was gotten from elsewhere.

Of the 50,756 tons of steel imported, 31,472 tons are estimated to be from imported ships that will be broken up to provide raw material for their factories.

Abbas Steel Group (ASG) is a Karachi-based firm which operates three steel re-rolling plants and one trading company and has been in the business for the last three decades.

“We are a manufacturing firm, we have invested huge amounts of money in this venture and unlike traders we simply cannot afford to not buy steel from the steel mills, regardless of its price,” explained CEO ASG, Khalid Khan, while talking about the reports which alleged that the firm had been the beneficiary of PSM price reduction.

ASG is currently producing a fraction of its total capacity. Khan confirms that their capacity is 234,000 tons annually and that their purchases since 2001 from both PSM and imports have not exceeded 57,000 tons. “The increase in our local purchases from PSM from 26,000 tons to 49,000 tons was not a first off, we purchased more than that amount during the period 2002 to 2003,” said Khan.

“Steel prices going down were simply a matter of demand and supply, there was an immense dumping of surplus steel from the international market and especially from Dubai and the market was flooded with cheap semi and finished products,” said the Director Operations ASG, Malik Bashir Ahmed.

He explained that there was no way that the price reduction was done as a favour to them, as had been alleged. He added that even if it did they were only buying 30 to 40 per cent of PSM’s products and were not buying enough to dictate pricing.

“Our records clearly show that the dealership we got in November 2008, had been applied for two months ago, it is beyond comprehension why media reports keep making it look like we are given special treatment,” said Khan. He was elaborating on media reports alleging that ASG receives special consideration and gets dealerships faster than they are supposed to.

ASG has a contract with Pakistan Steel Mills and has established a downstream Wire Rod and Baling Hoops industry near the PSM steel producing facility and has a contract with PSM that requires its undertaking on that land to buy all the steel it needs from PSM.

According to Khan, this was PSM’s way of protecting its production, and that their company was one of the first to get such a contract from PSM in 1983.

“We are a Karachi-based mill that gives our products an edge over other mills that are not in Karachi and whose transportation costs extra; those mills thus have to resort to things like defamation,” said Khan talking about what happened between them and the Competition Commission of Pakistan.

Published in The Express Tribune, July 19^th, 2010.