The steel industry in Pakistan has made an urgent appeal to the State Bank of Pakistan (SBP) to open letters of credit (LCs) for the import of essential raw materials.
In a statement, the Pakistan Association of Large Steel Producers (PALSP) said that the industry is on the brink of collapse due to a combination of factors, including the shortage of raw materials, the increase in international scrap prices, and the successive depreciation of the rupee over the last 18 months.
The steel industry is a crucial sector for the country’s economy, directly employing over 200,000 people and supporting numerous downstream industries. However, the lack of raw materials and the collapse of the industry’s trade finance limits have caused severe production disruptions and put the entire industry in jeopardy.
“We are facing a dire situation, and we need the support of the State Bank to help us secure the imports we need to keep our factories running,” said Wajid Bukhari, Secretary General of PALSP.
“Every day that we are unable to secure these imports, we are losing ground, and the future of our industry is in serious jeopardy,” he said.
According to industry data, steel production in Pakistan has collapsed by a whopping 50 percent. The steel industry has been hit hard by the inability to source raw materials and the limited availability of these critical components has driven prices to record levels.
The shortage is particularly acute in the case of scrap imports, which are a critical component of the steel industry. In the second quarter of the current fiscal year (Q2FY23), scrap imports stood at 616,000 metric tons, a decline of 50 percent from the same period last year (Q2FY22), when 1,235,000 metric tons were imported. This is the largest drop in scrap imports in the last two decades.
“We are calling on the State Bank to take immediate action to support our industry and open letters of credit for the import of raw materials,” the statement said.
The PALSP has requested that the SBP allow the industry to stay afloat, even if that means reducing its ability to import raw materials to 50 percent of last year’s volumes, due to the shortage of foreign currency in the nation.
