Large steel producers express serious concerns over non-opening of LCs

Islamabad-Members of Pakistan Association of Large Steel Producers (PALSP), who are leading players of steel sector representing documented sector have once again urged the government to support the steel sector to pull it from the crisis created due to LCs issue. Steel sector is the back bone of economy and has emerged as one of the leading exporting sectors of country’s economy. 
PALSP represents the transparent and documented steel manufacturing sector of the country. The above cited views of PALSP leadership were expressed during an emergency meeting of the association to deal with the prevailing crisis like situation. The meeting was joined by the leading players of Long Steel industry namely Nomee Steels, Naveena Steels, Mughal Steels, Amreli Steels, Agha Steel Industries, FF Steels, Faizan Steels, Karachi Steels, Ittehad Steels, Fazal Steels, Kamran Steels, Pak Iron, and Pak Steel. During the meeting, the steel industry leadership expressed profound concerns about the ongoing industrial as well as economic situation amid depleting foreign reserves and curbs on LCs, continuous rupee depreciation, tremendous inflationary pressure, liquidity crunch and significant rise in the cost of production. 
The members were very concerned especially about curbs on opening of LCs and fear that if the matter is not resolved within 4 business days, it would lead to indefinite closures of factories, leading to massive deindustrialisation and job losses across the board. During the meeting, it was noted that there are 44 allied industries that are dependent on steel supply. Shutting the factories due to non-availability of raw material would lead to irrecoverable and irreparable damage to the steel industries as once the plants enter force majeure shutdown, it would be impossible to restart the said units. 
It is pertinent to note that local dispatch of cement is down by only 9 percent for the month of December year on year (3.67million MT), whereas steel import of scrap is down for the month by a record 55 percent year on year (191,000 MT).  The sharpest year on year drop to date in the last 10 years suggesting massive industrial shutdowns. 
This means that severe steel shortage shall accrue drastically in the coming months of February and March. If SBP administrative restrictions last longer than a 4 business days, then steel rebar prices will cross 280,000 rps/tonne. The imports of scrap for the month of December 2022 is only 100 million USD, hardly 2 percent of Pakistan’s total import bill, whereas if not allowed would result in a loss of at least 7.5million jobs due to shutting down of cement, cables, tiles, allied and construction industries. 
It may be mentioned here that steel sector has emerged as the 4th largest exporter in the past few years. In the last financial year, steel exports stood at over $800 million with zero subsidies extended by the government. It is the largest ‘zero subsidy exporting sector’ of Pakistan in comparison to other sectors which enjoy lavish government subsidies with reference to tariffs, duties and preferential financing. The ability to grow the sectoral export potential is far greater than textiles, however, if raw material import is administratively chocked, it would result in irrecoverable damage and irreparable deindustrialisation, where the effects would be felt for decades to come.

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