KARACHI: The steel industry in Pakistan has been facing a severe crisis due to the State Bank of Pakistan’s persistent inability to establish letters of credit, which has led to the closure of multiple steel companies and significant job losses.
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.
The Secretary General of PALSP, Wajid Bukhari, 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.
Bukhari stated that steel contributes over 5% to Pakistan’s GDP and provides employment for more than 200,000 people with an annual production capacity of over 5 million tons.
However, many companies have been forced to reduce production or shut down operations as a result of the lack of LCs.
The shortage of foreign exchange reserves was cited as the cause of the SBP’s inability to open LCs, resulting in delays in importing vital raw materials such as scrap steel and additives.
According to the analysts, prices could easily reach Rs.300,000/ton if the shortage continues, with steel bar prices already surpassing Rs.275,000/ton.
The prediction is that Pakistan’s steel production could drop by over 50% in the coming year, which would have a disastrous impact on both the economy and the citizens.