The steel industry fears a shortage of steel in the country coupled with an increase in the cost of steel as the industry is facing acute difficulties in the import of raw materials due to problems being faced in the opening of letters of credit (LCs).
In a statement, the Pakistan Association of Large Steel Producers (PALSP) has demanded the government to take urgent measures for addressing the issue of delay in the opening of LCs for steel imports. It has also urged the State Bank of Pakistan (SBP) governor and the finance minister to help the troubled industry by ensuring the timely opening of LCs.
It said that there is a dollar crisis in the banks over the country and importers are unable to open letters of credit (LC) due to a lack of dollars and are not able to import goods.
The statement said that banks are also hesitant to open LCs for the import of raw materials and delays in LC opening & approvals from SBP are also needed. The production activities are badly suffering due to delays in the opening of LCs.
During the first 4 months of the current year, Pakistan’s scrap imports have decreased by 40.58 percent. In the current fiscal year (July 22 to October 22) in comparison to the previous fiscal year (July 21 to October 21), the scrap imports stood at 890,783 MT in CFY (July 22 to Oct 22) compared to 1,252,242 MT in the previous fiscal year (July 21 to Oct 21).
Steel manufacturers are now facing serious supply constraints and fear that there is a likelihood that they might not be unable to meet the expected increased demand for steel as soon the construction/rehabilitation activity picks up in the flood-affected areas. The steel industry is concerned that if this issue is not addressed forthwith, it will be disastrous and will lead to further escalation in the prices of steel.
The ongoing situation has created serious problems for the industry due to the shortage of raw materials for their manufacturing activities. Due to the non-release of import documents and consequent non-availability of raw materials, many steel mills are on the verge of closure. Some have already cut their production drastically.
Due to delays by SBP in LC’s approval, continuous rupee depreciation, and uncertainty in the market the manufacturers are facing disruptions in industrial production, unbearable demurrages and container charges, and loss-making delays in the fulfillment of orders. All of this will result in inflationary pressures in the domestic markets and further discourage investor sentiment, the statement added.