ISLAMABAD: Pakistan Association of Large Steel Producers (PALSP) has raised their strong concerns with Prime Minister Imran Khan and other ministers for offering heavy government subsidies and special concessions to revive Tuwairqi Steel Mills without addressing concerns of the local steel industry. It said the Tuwairqi Steels will not be viable in the export market due to its low output despite massive power, gas concessions.
In a letter written to PM Imran Khan, Advisor to PM on Finance Dr Abdul Hafeez Shaikh and Advisor to PM on Commerce Abdul Razak Dawood, Wajid Bukhari Secretary General PALSP stated that while it is good to design policies that help revive industry and incentivize investment, we must see the pros and cons of each policy initiative as well as the cost and benefit analysis. Our association is of the impression that this project is being pushed with great haste and by ignoring the tenets of meritocracy of the PTI Govt. We have already communicated our concerns on the subject project, and wish to reiterate and submit it again. They stated that at full capacity, Tuwairqi Steel Mills would be getting a subsidy of almost Rs 13.2 billion per annum from the government including subsidy on gas and income tax exemptions. Tuwairqi’s product, DRI, would try and replace imported scrap but import substitution numbers would be
negative i.e. major components of DRI manufacturing are RLNG and iron ore, which are both imported products. Moreover, import substitution will only be done partially because technology predominantly used in Pakistan for steel making can only process maximum 20% of gas based DRI, the balance will still have to be imported scrap. Given that many DRI exporting countries are those where gas prices are in the range of $ 2.5 and may even have iron ore available domestically, it doesn't seem that Tuwairqi Steels will be viable in the export market even after subsidized gas is available to them at USD 4.65 per MMTBU.
Since DRI must be at least 15% cheaper than shredded scrap prices for it to make commercial sense to substitute, the maximum local buyers will be willing to pay currently for DRI is USD 260. (Here the main factor is not higher electricity consumption but it is low yield that has main impact on cost and also the alloy recovery from scrap vs DRI). Only subsidized gas price and iron ore pellets will cost Tuwairqi USD 220 according to current prices. Will they be able to cover all other costs and overhead in just USD 40? From the above it is clear that we will be giving perpetual gas subsidy to Tuwairqi and we will have to import RLNG to augment our demand of gas which doesn't make sense; therefore we should promote production of DRI and iron pallets through use of coal gas and iron ore.
It is also proposed that in view of the shortage of local natural gas and the extremely high cost of RLNG, the Midrex plants can be converted into coal gas high, which is used to convert iron ore/iron ore pellets into DRI and then converted into steel. This technology is currently being put to work in many countries, same can be checked on Website/ YouTube. Lastly, we are also attaching with this letter some of the clipping of reports appearing in the US media, about the key sponsor of this project, the letter concluded.
Source: This news has been taken from https://www.thenews.com.pk/
