A number of steel mills in the country have already shut down with more closures expected in the coming weeks as the State Bank of Pakistan (SBP) has effectively banned the opening of letters of credit (LCs) for the import of steel scrap, a key raw material for the steel industry.
In an interview with SDTV, FF Steel Chief Executive Officer (CEO) Zarak Khan Khattak said that in a circular issued in December, the central bank instructed the commercial banks to open LCs for essential items and export-oriented industry on a preferential basis but verbally banned LCs for import of steel scrap.
Khattak said that steel scrap is the main raw material used by the steel industry and without its availability the industry cannot function. He highlighted that bigger steel mills have the availability of steel scrap till the end of February after which they will shut down while the medium-scale steel mills can sustain production by the mid of February. He also pointed out that smaller steel mills have already started shutting down as they have run out of raw materials.
Khattak said that the average monthly import bill of steel scrap is a mere $150 million, which accounts for just 2 percent of Pakistan’s monthly import bill. He lamented that luxury cars are still being imported while restrictions have been placed on the import of steel scrap which is vital for the steel industry.
He warned that if the steel industry shuts down, employment of over 7 million people will be at stake as the construction, cement, real estate, and many other industries will also come to a halt.
It is pertinent to mention here that the steel industry has repeatedly raised the issue of the non-opening of LCs in the past few weeks.
According to the Pakistan Association of Large Steel Producers (PALSP) the shortage of raw materials, caused by the SBP’s failure to establish LCs, has resulted in production delays and financial losses for companies.
PALSP Secretary General Wajid Bukhari in a recent statement also stressed the importance of the steel sector to the country’s economy and called for immediate action by the government and the SBP to resolve the crisis and protect the industry.
