Pakistan’s steel industry has made an urgent request to the State Bank of Pakistan (SBP) for the opening of letters of credit (LCs) for the import of critical raw materials.
The Pakistan Association of Large Steel Producers (PALSP) said in a statement that the industry is on the verge of collapse due to a combination of factors, including a lack of raw materials, an increase in international scrap prices, and the rupee’s successive depreciation over the last 18 months.
The steel industry is an important part of the country’s economy, directly employing over 200,000 people and supporting a variety of downstream industries. However, a lack of raw materials and the collapse of the industry’s trade finance limits have caused severe production disruptions, threatening the entire industry.
“We are in a dire situation, and we need the State Bank’s assistance to secure the imports we require to keep our factories running,” said Wajid Bukhari, Secretary General of PALSP.
“Every day we fail to secure these imports, we lose ground, and the future of our industry is jeopardised,” he said.
Steel production in Pakistan has dropped by a whopping 50%, according to industry data. The steel industry has been hard hit by the inability to source raw materials, and the scarcity of these critical components has driven prices to all-time highs.
The scarcity is especially acute in the case of scrap imports, which are vital to the steel industry. Scrap imports totaled 616,000 metric tonnes in the second quarter of the current fiscal year (Q2FY23), a 50% decrease from the same period last year (Q2FY22), when 1,235,000 metric tonnes were imported. This is the most significant decrease in scrap imports in the last two decades.
“We are urging the State Bank to take immediate action to support our industry by opening letters of credit for raw material imports,” the statement said.
The PALSP has asked the SBP to allow the industry to stay afloat, even if it means reducing its ability to import raw materials by half last year’s volumes, due to the shortage of foreign currency in the nation.