IRON INDUSTRY OF PAKISTAN

ACKN OWLEDG EMEN T Dear Reader, All praises and thanks to Almighty Allah, who is the lord and the creator of this universe and by whose power and glory all good things are accomplished. He is the most merciful, who bestowed on us the potential, ability and an opportunity to work on this report. We would like to extend our sincere thanks to our respected teacher Mr. Zeeshan Ali , who is well known for his vast expertise and guided us in the research report on “ ANALYSIS OF STEEL & IRON INDUSTRY OF PAKISTAN”, further providing providing us a great opportunity to learn the implementation of the courses we had taken

in a life case scenario. We believe that this experience have not only added value to our knowledge but have also strengthen the core knowledge of the previous courses related to Economics. It was his dedication in supervising the project that made us study and learn practical life matters in a well-defined manner. he, with his vast experience and knowledge, lead us in every step during the course and also in the preparation of this report. A number of people, whom we visited, visited, provided us with valuable information. We would certainly like to offer our special thanks to these people for helping h elping us out when we needed help.

ANALYSIS OF IRON & STEEL INDUSTRY OF PAKISTAN AND WORLD OVERVIEW BAHRIA UNIVERSITY OF BUSINESS & MANAGEMENT SCIENCE KARACHI

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TABLE OF CONTENTS IRON ...................................................................... .......................................................................................................... ..................................................................03 ..............................03

................................................................................................................ ..........................................03 .....03 KINDS OF IRON:........................................................................... .......................................................................................................... ......................................................03 .................03 HEMATITE: ..................................................................... .............................................................................................................. ......................................................03 .................03 SIDRITE:......................................................................... ............................................................................................................ .................................................03 ...........03 MAGNETITES: ...................................................................... ........................................................................................................... ......................................................03 .................03 LIMONITE:...................................................................... STEEL ..................................................................... ......................................................................................................... ..................................................................04 ..............................04 ALMUNIUM ...................................................................... ........................................................................................................... ......................................................04 .................04 PAKISTAN STEEL INDUSTRY OVERVIEW ...............................................................................05

.................................................................07 PAKISTAN STEEL HOT AND COLD ROLLED R OLLED STEEL PLANT:.................................................................07 ..........................................................................................................07 ...................................07 PLANT CONSTRUCTION: ....................................................................... .......................................................................................................... ..........................................08 .....08 STEEL CONVERTERS:..................................................................... 1700 HOT STRIP MILLS: ...................................................................... .........................................................................................................08 ...................................08 :............................................................................................... ..................................................08 ..............08 COLD ROLLING MILLS:........................................................... WORLD PRODUCTION (1970 – 2006)....................................................................................09 WORLD WIDE STEEL PRODUCTION.......................................................................................09 THE WORLD’S TOP TRADING COUNTRIES ............................................................................10 :.......................................................................................... .....................................................................10 ................................10 EXPORTERS:..................................................... 1997-2 005: ....................................................................10 ....................................................................10 IMPORTERS – ANALYSIS BY PRODUCT 1997-2005: .............................................................................................................. .................................................11 ...........11 IMPORTERS: ........................................................................ IMPORTERS – STEEL IMPORT BY MIDDLE EASTERN COUNTRIES INCLUDING INCLUDING PAKISTAN: .......................11 MAIN REGIONAL STEEL TRADE FLOWS (2007).....................................................................12 WORLD STEEL REVIEW...........................................................................................................13 STEEL MAING PROCESS..........................................................................................................15 STEEL AND IRON INDSUTRY OF PAKISTAN (IN DEPTH ANALYSIS) ......................................21 ENERGY SOURCE FOR STEEL SECTOR ....................................................................................22 IRON ORE OF PAKISTAN.........................................................................................................24 ....................................................................................................24 ..............................24 CHINIOT IRON ORE PUNJAB: ...................................................................... ...........................................................................................24 .................24 DILBAND IRON ORE BALUCHISTAN: .......................................................................... THE BIG QUESTION (WHY LOCAL IRON WAS NEVER USED):............................................................24 SWOT ANALYSIS ........................................................................... ................................................................................................................ ..........................................26 .....26 .............................................................................................................. .................................................26 ...........26 STRENGTHS: ........................................................................ ............................................................................................................ .................................................26 ...........26 WEAKNESSES: ...................................................................... .............................................................................................................. ..........................................27 .....27 OPPORTUNITIES: ......................................................................... ............................................................................................................ ......................................................29 .................29 THREATS: ....................................................................... STEEL SECTOR CASE STUDY (EYE OPENING FACTS) ....................................................................31 PRIVITIZATION CASE ..............................................................................................................34 ARTICLES AND REFERENCES ..................................................................................................35 .................................................................................35 ...........35 IRON, STEEL PRODUCTS PRICES SHOOTUP: ...................................................................... STEEL INDUSTRY’S SURVIVAL LINKED TO USING LOCAL IRON ORE:...................................................36 .............................................................38 THE PAKISTAN STEEL MILLS IS IN THE EYE OF THE STORM: .............................................................38 ANALYSIS OF IRON & STEEL INDUSTRY OF PAKISTAN AND WORLD OVERVIEW BAHRIA UNIVERSITY OF BUSINESS & MANAGEMENT SCIENCE KARACHI

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IRON It can't be denied in the modern times that an overall development of a country depends to a greater extent on Iron and Steel Industry because we are passing through the 'Steel Age', where right from a sewing needle to aircraft all the goods require iron and steel to come into being. Iron and steel is indispensable to use for making machines, tools, war items and other various goods of daily life. Rail tracks, rail bogies, aero-planes, ships, motor cars, bridge dams, tunnels and pipe lines required iron and steel. Significance of iron and steel could be accessed through the following facts: a) Fast, modern and cheap means of transport play decisive role in the economic development of a country. For this t his purpose, rails, ships, aero planes, motor vehicles etc. b) If the supply of consumer’s goods a re abundant in a country, it is the symptom that the country is self sufficient and does not depend on others. The consumer’s goods are made on machines which are

made of iron and steel. In the light of this discussion, it could confidently be concluded that if a country is deficient in iron and steel, it should not dream for the economic development. development. KINDS OF IRON In most of the countries is achieved in the solid form but iron, in fact, is achieved in the following kinds of oars. 1) HEMATITE With a iron weight of 70 per cent. The colour of such iron oar is reddish. Sometimes the iron is achieved in strips form in the oar called 'Layered Iron'. Hematite oar is mined excessively in Russia, America and India. The standard weight of this kind of iron is 5.0 and the standard hardness is 0.5 . 2) SIDRITE The iron proportion in the Sidrite oar is 48 per cent and it is mostly mined in the European countries. there are various kinds of Sidrite iron oar. 3) MAGNETITES Magnetites oar is black in colour because it contains the maximum iron percentage. The kind of iron oar mined from sweden is the same. Teh standard weight of this t ype is 5.4 and the standard hardness is 5.5. 4) LIMONITE Limonite oar contains the iron weight 50 pet cent. the special weight of water molecule is different but maximum is 3.8 while the standard hardness is 5.5. The colour of this kind of oar is either grey of yellowish. This iron oar is excessively mined in France F rance and Britain. The other metals mixed in the iron oar are lime, silica, aluminum, oxide, phospshorus, sulphur, manganese and the water molecules. The oar having more particles of sulphur and phosphate is not considered important for the iron purpose because it is d ifficult to clean therefore it becomes expensive. exp ensive. ANALYSIS OF IRON & STEEL INDUSTRY OF PAKISTAN AND WORLD OVERVIEW BAHRIA UNIVERSITY OF BUSINESS & MANAGEMENT SCIENCE KARACHI

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STEEL Pakistan Steel is one of the important ventures in public sector industries, which is aimed at providing basic raw material to local high-tech industries in the country. The installed capacity of 1.1 million tonnes of raw steel is extendable up to 3 million tonnes. The main products of Pakistan Steel are coke, pig iron, billets, hot rolled coils / sheets, galvanized sheets etc. The re-structuring of Pakistan Steel is under active consideration of the government and a BMR project is under implementation on self-financing basis. The performance of Pakistan Steel is summarized. Pakistan Steel has established 34 downstream industries in the private sector for optimum utilization of its production capacity. Another 9 units are in various stage of completion. Pakistan Steel has created a fully developed industrial estate within its boundaries for the aspirant entrepreneurs to provide opportunity to locate downstream industry near the source of raw material.

ALUMINUM Aluminum is one of the Pakistan's major Imports. Pakistan cannot develop the Aluminum due to the lack of technology. We hope that Pakistan will be developing Aluminum and saving the money and raise their export.


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PAKISTAN STEEL INDUSTRY OVERVIEW Very few third world countries produce steel. Establishing steel manufacturing in Pakistan was a major feat. Acquisition of steel manufacturing technology in the 60s and 70s was like acquiring a nuclear processing plant plant today. From 1947 to 1973 Pakistan struggled with all Western powers to establish a steel plant in Pakistan. No country, not even the US, or the SEATO or CENTO allies sold a steel plant to Pakistan. American, British and French private firms were prohibited from exporting plants and steel manufacturing technology to Pakistan. The Pakistan steel mill is Pakistan’s largest industrial complex. The plan for the steel mill was created in 1968

by President Ayub Khan, but it was really th e work of Zulfiqar Ali Butto’s visit to the USSR in 1972 that consecrated the deal. Pakistan Steel Mills supported Pakistan’s defense production in producing tanks, missiles, sugar mills, general construction, bridges, and of course Pakistan’s nuclear

programs. With a boom in construction the steel mill will be seminal in supporting the new economy as well as the various pipeline projects. The Pakistan Steel Mill produces 1 million tons of steel. It was to be upgraded by the Russians to 2 million and then upgraded by the Chinese for 3 million tons. Those expansion projects are the need of the hour. In 1968 the Government of Pakistan decided that the Karachi Steel Project should be sponsored in the public sector, for which a separate Corporation, under the Companies Act, be formed. In pursuance of this decision, Pakistan Steel Mills Corporation Limited was incorporated as a private limited company to establish and run steel mills at Karachi. Pakistan Steel Mills Corporation concluded an agreement agreement with V/o Tyaz T yaz Promexport of the USSR in January, 1969 for the preparation of a feasibility report for the establishment of a coastal-based integrated steel mill at Karachi. In January 1971 Pakistan and the USSR signed an agreement under which the latter agreed to provide techno-financial assistance for the construction of a coastal-based integrated steel mill at Karachi. The foundation stone of this vital and gigantic project was laid on 30th December, 1973 by the Prime Minister of Pakistan Zulfikar Ali Bhutto. The mammoth construction and erection work of an integrated steel mill, never experienced before in the country, was carried out by a consortium of Pakistani construction companies under the overall supervision of Soviet experts. Pakistan Steel not only had to construct the main production units, but also a host of infrastructure facilities involving unprecedented volumes of work and expertise. Component units of the steel mills numbering over twenty, and each a big enough factory in its own right, were commissioned as they were completed between 1981 to 1985, with the Coke Oven and Byproduct Plant coming on stream first and the Galvanizing Unit last.


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Commissioning of Blast Furnace No.1 on 14th August, 1981 marked Pakistan’s entry into the elite club of iron

and steel producing nations. The project was completed at a capital cost of Rs.24,700 million. The completion of the steel mill was formally launched by the then-President of Pakistan on 15th January, 1985. Pakistan Steel today is the country’s largest industrial undertaking, having a production capacity of 1.1 million tonnes of steel.

PAKISTAN STEEL IMPORT / EXPORT OF IRON AND STEEL 1.2 1 N O 0.8 T N 0.6 O I L 0.4 L I M 0.2 0

2002-03

2003-04

2005-06

2007 - 08

Imports

1.09

0.77

1.01

0.89

Exports

0.045

0.038

0

0

The steel consumption averages between four to five million tonnes annually. For instance, in the last year, steel consumption stood at about 4.2 million tonnes, in which Pakistan Steel Mills contributed about 25 percent by production 1 to 1.1 1 .1 millions while the rest was imported to meet the local demand. d emand. PAKISTAN STEEL HOT AND COLD ROLLED STEEL PLANT, PAKISTAN Located some 40 kilometers to the east of Karachi, Pakistan Steel and its related facilities are spread over an area of 18,600 acres, or about 29 square miles. The construction of the complex involved the use of 1.29 cubic meters of concrete, 330,000 tonnes of machinery, steel structure and electrical equipment, and the employment employment of over 40,000 40 ,000 workers workers at the peak of construction. c onstruction. In January 1971, the Governments of Pakistan and the USSR signed an agreement, the latter undertaking to provide technological and financial assistance for the construction of a coastal based integrated steel complex. The total capital cost of the project is estimated at about Rs. 24.7 billion. PLANT CONSTR UCTION The construction work on the main plant was started in 1976. Among the main complexes and units of the project, the first coke oven battery was commissioned in April 1981, the first blast furnace in August 1981, the billet mill in October 1982, and the two converters, one bloom caster and two slab casters of the steel making plant between December 1982 and November 1983. The hot strip mill was commissioned in December 1983, the second blast furnace in August 1984, the cold rolling mill in December 1984, the second coke oven battery in May 1985 and the expansion project billet caster in November 1989.


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STEEL CONVERTERS The Steel Making Plant Complex has two Linz. Donawitz converters. Each converter has a capacity of 130 tonnes of steel for which there is one bloom b loom caster and two slab casters. Bloom 260 x 260 mm sizes are used for making billets which are utilized for manufacturing various steel products. The slabs of 150-200 mm thickness and 700-1500 mm width sizes produced at the Steel Making Plant are fed to the hot strip mill where they are rolled into stripes, sheets and coils. The first converter was commissioned on 18th December 1982, the bloom caster on 22nd December 1982, the second converter on 17th February 1983, the first slab caster on 10th August 1983 and the second slab caster on 1st November 1983. 1700 HOT STRIP MILL The 1700 hot strip mill operates on slabs produced at the steel making plant. It produces hot rolled sheets, coils and strips suitable for ship building and the manufacture of pipes of small, medium and large diameter, bodies of cars, buses and other vehicles, railway wagons, transformers, boilers, big tanks, machinery and formed sections. The hot rolled sheets are also utilized for the production of cold rolled sheets. It has a designed capacity of 445,000 tonnes. COLD ROLLING MILL The cold rolling mill is a cold reversible mill with 200,000 tonnes capacity, from which 10,000 tonnes are turned into cold formed sections. The cold rolling mill operates on hot rolled sheets and coils produced at the hot strip mill. Cold rolled sheets are used for the production of enameled wares, bicycles, steel fabrication, steel containers, drums, barrels, jerry-cans, vehicle and bus bod ies, steel furniture, machinery parts, products and appliances, oil and gas appliances etc. Cold rolled sheets are also used for the production of galvanized sheets, and black plates and tinplates. Galvanized sheets are used for containers, trunks, boxes, packets, steel shuttering, desert coolers, construction and roofing, ducting equipment, appliances, paneling, utensils, air-conditioners, water heaters and fresh water tanks. Cold and hot-formed sections are used for steel fabrications, furniture, vehicle and bus bodies, building construction, miscellaneous machinery and equipment/parts, steel doors and windows.


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WORLD PRODU CTI ON (1970 – 2006) Steel is one of the most important metals which are used in today world from major projects such as dams, cars, bridges, buildings, plazas but also in minor things such as utensils and even in packaging, the world production of steel in respect of other alternatives is shown on right.

In quantity terms, steel is by far the most important material of all the substitutes listed opposite, and has actually gained in importance during the last 30 years. This is despite the fact that technical progress has led to a fall in the relative steel content of steelcontaining goods, representing extraordinary performance in the competition with substitutes. The steel industry has developed from a supplier of an input material to a partner of many steel processors, and a supplier of high-tech products and tailor-made components. In addition, production in highly efficient (and thus economical) plants ensures consistently competitive prices.

WORLD STEEL DEMAND CON TINUOUS TO GROW: FORE CAST 2008 With a market share of 53%, Asia is currently by far the world’s largest marke t for finished steel products. China alone took up 32%. As market supply per head of population in China is only about two-thirds that of the EU or the USA, sustained growth can also be expect to continue here in future. Europe is the world’s second-largest second-largest market with a market market share of 20% (the EU 27 alone: 17%), followed by N. America with 14% (USA alone:11%).


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WORLD CRUDE STEEL PRODUCTION BY REGIONS In 2007 world crude steel production reached more than 1.3 bn. tonnes t onnes for the first time - a new record. China was principally responsible and, with slightly over 489 m. tonnes (36% of world steel production) produced almost 66 m. tonnes more than in the previous year. Almost 16% of world steel production took place in the EU, followed by Japan, the USA and Russia.

WORLDWIDE STEEL PRODU CTION World crude steel production reached a new record level in 2007 - 1.34 bn. tonnes. More than 66% is based on the oxygen steel route and 31% on the electric steel route, whereby the share of electric steel is rising. The proportion of continuous casting has meanwhile risen to 91%, though there are large regional differences. While, for example, only 50% is achieved in the CIS, continuous casting represents 95% in the EU 27, and 98% in Japan and South Korea. The worldwide trend towards flat products led to a share of almost 55% of the production of hot rolled steel products. World iron ore production is concentrated in just a few countries. China, Brazil and Australia make the largest contribution to total world production with 22%, 21% and 18% respectively. respectively.


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THE WORLD'S TOP TRADING COUNTRIES EXPORTERS Having jumped from 5th to largest exporter in 2006, China recorded a further 33% growth in exports in 2007 to 65.2 million tonnes. This increase came despite exports falling every month from a peak in April 2007 to 7.6 million tonnes to a 19 month low in November 2007 of 3.9 million tonnes as changes to export rebates and taxes reduced export levels. The world's 2nd largest exporter, Japan, saw exports rise 5% to 35.8 million tonnes. EU27 total exports remained remained largely unchanged at 32 million tonnes with falls in shipments to the Americas and the Middle East being offset by increases elsewhere, particularly Non-EU Europe, the CIS and Africa. Elsewhere Elsewhere the tonnage exported by both Russia and Ukraine fell. This coincided with an increase in imports by both countries count ries reflecting strong domestic demand. WORLD STEEL EXPORTS - ANALYSIS BY PRODUCT - 1997 – 2005 Product 1997 1998 1999 2000 2001 Ingots and se mi-finished material material Railway track material Angles, shapes and sections Concrete reinforcing bars Bars and rods, hot-rolled Wire rod Drawn wire Other bars and rods Hot-rolled strip Cold-rolled strip Hot-rolled sheets and coils Plates Cold-rolled sheets and coils Electrical sheet and strip Tinmill products Galvanised sheet Other coated s heet heet Steel tubes t ubes and fittings Wheels (forged and rolled) and axles Castings Forgings Total

2002

2003

2004

2005

41.6 2.5 17.2 10.2 9.7 15.5 3.7 2.7 2.6 2.8 39.5 15.4 22.9 1.9 5.5 15.1 4.6 21.7 0.3 0.4 0.4

35 2.6 17.3 10.4 10.2 14.5 4.2 3.2 2.6 2.9 44.1 17 25.9 2 5.6 17.9 5.5 21.8 0.3 0.4 0.4

44.9 2.8 16.1 11 8.7 15.5 4.4 3.1 2.7 3 45.8 15.8 26.9 2.1 5.8 19.1 5.4 18.8 0.7 0.4 0.4

48.1 2.1 18.5 11.1 9 16.8 4.2 3.6 3.1 3.5 49.1 17 29.1 2.6 6.4 21.9 6.4 21.5 0.3 0.5 1.5

47.3 2.5 17.8 13.2 9.3 16.3 4.2 3.8 3.4 3.2 43.7 17.7 26.9 2.6 6 20.5 6.1 23.8 0.3 0.5 0.8

50.5 2.5 17.1 13 8.5 17.6 4.5 3.6 3.4 3.4 49 18.2 28.4 2.7 6.2 23.1 6.7 24.5 0.3 0.5 0.8

51 2.7 17.7 14.8 9.1 17.9 4.9 3.9 3.2 3.6 50 20.6 29.8 3.4 6.4 24.3 6.8 23.8 0.3 0.6 0.8

58.9 2.4 19.4 15.9 9.9 20.6 5.5 4.8 3.2 4.5 54.9 24.1 31.2 3.7 6.5 26.8 7.4 28.2 0.4 0.9 1.1

59.5 2.4 18.5 17.9 10.2 19.8 5.4 4.9 3.3 4.5 53.3 26.2 29.9 3.7 6 25.6 7.3 31 0.4 0.9 1

236.2

244

253.4

276.4

270

284.5

295.7

330

331.9


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IMPORTERS EU27 imports surged 25% in 2007 to over 49 million million tonnes. Meanwhile US imports fell 27% to 29.5 million tonnes on the back of a slowdown in the US economy. Chinese imports imports continued to fall, down 9% to 16.9 million tonnes. In conjunction with their escalating exports this took the Chinese trade surplus in steel to over 48 million tonnes, an increase of 18 million tonnes in 2007 and a swing of 83 million tonnes since their peak trade deficit of 35 million tonnes in 2003. Exports to the Middle East were were particularly strong in 2007 increasing 35% to 35 million tonnes, and led by shipments to Iran, up 60% to 12 million tonnes, and UAE, up 36% to 9 million tonnes. tonnes. The dominant dominant origins were China, up 200% to 8.5 8 .5 million tonnes, Russia up 60% to 5.7 million tonnes and Ukraine up 21% to 5.0 million tonnes.


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WORLD STEEL REVIEW IRON & STEEL STATISTI CS BUREAU, MARCH 2008

Total crude steel production for the 66 countries reporting to the IISI in January 2008 was estimated to be 113.0 million tonnes, an increase of 4.9% on January 2007. If China is excluded, the remaining 65 countries showed a 3.6% rise in crude steel production. Only the European Union and Africa showed a drop in steel production. In the European Union crude steel production for the 27 in January fell by 0.4% on January 2007 to 17.9 million tonnes. In Germany steel production was down 4.9% to 4.1 million tonnes, while French production fell by 7% to 1.6 million tonnes. Italy’s steel production , on the other hand, increased by 6.6% to 2.85 million tonnes. Spanish steel production also showed an increase, up 2.7% to 1.5 million tonnes. In the UK, however, production fell by 0.5% to 1.1 million tonnes. Dutch steel production showed the largest rise within the EU, up by 15.7% to 706 thousand tonnes. German steel exports showed a very slight rise in 2007 to almost 30 million tonnes putting it into fourth place in the top exporters ahead of Russia. German imports rose by 6% to 27.4 million tonnes maintaining its position as the second largest steel importer behind the t he USA. Outside of the European Union, steel production in Tur key increased by 8.6% to 2.2 2 .2 million tonnes, while in Serbia production rose by 10.8% to 161 thousand tonnes. Registrations of new cars in Europe showed a decrease of 0.3% in January 2008. Italian registrations fell by 7.3% to 232 thousand units, while German registrations increased by 10.5% to 221 thousand units. In France registrations decreased by 5.6% to 162 thousand units, while in the UK registrations fell by 2.1% also to 162 thousand units. The Spanish total was down 12.7% to 102 thousand units. Several East European countries showed significant increases: Poland’s total was up 24.6% to 28.4 thousand units, while in Romania t he total increased by 34.5% to 29.5 thousand units. Although their total registrations were small in comparison, the Czech Republic was up 10.2%, 10.2 %, Slovenia Slovenia was up 24% and Slovakia was up 36.6%. 36 .6%. In Russia crude steel production rose by 3.4% compared to January 2007, to 6.5 million tonnes,with Ukrainian production only up by 0.8% to 3.6 million tonnes. Steel production in Kazakhstan dropped by 13%. Russian steel exports fell by 5.8% in 2007 pushing them from third to fifth place in the top 5 exporting countries. 51% of the 29.6 million tonnes total was ingots and semis. The Ukraine export total of 30.3 million tonnes put it into third place, despite a fall of 1% compared to 2006. Ingots and semis accounted for 39% of total Ukrainian steel exports in 2007. In North America January crude steel production was up 10.5%, with US production up 11.4% to 8.4million tonnes. Canadian steel production increased by 9.8% to 1.5 million tonnes, while Mexican production rose by 5.9% to 1.55 million tonnes.


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US steel imports dropped from the high of 42.4 million tonnes in 2006 to 31.4 million tonnes in 2007 which was still over one million tonnes higher than in 2005. Semis accounted for the largest imported product group at 6 million tonnes, down by 28.4% on 2006. However, welded tube imports rose by 12.6% to 5.4 million tonnes. Hot rolled coil imports were down by 46% to 3.3 million tonnes. In terms of the countries of origin Canada strengthened its position by increasing its exports to 6.4 million tonnes accounting for 20% of the US total, up from 13% the year before. China came second at 4.4 million tonnes, 14% of the total, although this was down from the 5.1 million tonnes in 2006. Imports from Mexico dropped to 3 million tonnes, 9.6% of the total, while imports from Russia dropped by over 2 million tonnes to 1.1 million pushing it into seventh place. South American crude steel production increased by 12.7% in January, with Brazilian production up by 13.6% to 3.1 million tonnes. Venezuelan steel production increased by 3.7% to 440 thousand tonnes, while Argentinian production jumped by 24% to 417 thousand tonnes. In Africa and the Middle East, Iran’s steel production rose in January by 4.4% to 890 thousand tonnes, while Egypt’s production decreased by 1.6% to 540 thousand tonnes. South Africa’s production, however, fell by

8.8% to 743 thousand tonnes. In Saudi Arabia steel production rose by 23.6% to 444 thousand tonnes Asian crude steel production for the five major countries in January was up 5.5%, led by China with an increase of 7.3% to 40.9 million tonnes. Indian steel production rose by 8.8% to 4.8 million tonnes. Japanese production increased by 1.8% to 10.25 million tonnes. South Korean production actually fell by 0.8% to 4.35 million tonnes, while in Taiwan steel production was down 3.4% to 1.7 million tonnes. South Korean steel imports rose by 18% in the first 11 months of 2007 to 24.2 million tonnes, half of which came from China, an increase of almost 3 million tonnes. Japan accounted for a further 8.7 million tonnes, 36% of the total. Hot rolled coil imports were up 13.5% at 7 million tonnes, while imports of semis increased by 23% to 5.6 million tonnes. Imports of hot rolled plate in lengths jumped by 25% to 4.3 million tonnes.


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STEEL MAKING PROCESS


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Steel is made by the Bessemer, Siemens Open Hearth, basic oxygen furnace, electric arc, electric highfrequency and crucible processes. In both the Acid Bessemer and Basic Bessemer (or Thomas) processes molten pig iron is refined by blowing air through it in an egg-shaped vessel, known as a converter, of 15-25 tonnes capacity. In the Siemens process, both acid and basic, the necessary heat for melting and working the charge is supplied by oil or gas. Both the gas and air are preheated by regenerators, two on each side of the furnace, alternatively heated by the waste gases. The regenerators are chambers filled with checker brickwork, brick and space alternating. The high nitrogen content of Bessemer steel is a disadvantage for certain cold forming applications and continental works have, in recent years, developed modified processes in which ox ygen replaces air Steel is made by the Bessemer, Siemens Open Hearth, basic oxygen furnace, electric arc, electric high-frequency and crucible processes.

CRUCIBLE AND HIGH-FREQ UENCY METHODS

The Huntsman crucible process has been superseded by the high frequency induction furnace in which the heat is generated in the metal itself by eddy currents induced by a magnetic field set up by an alternating current, which passes round water-cooled coils surrounding the crucible. The eddy currents increase with the square of the frequency, and an input current which alternates from 500 to 2000 hertz is necessary. As the frequency increases, the eddy currents tend to travel nearer and nearer the surface of a charge (i.e. shallow penetration). The heat developed in the charge depends on the cross-sectional area which carries current, and large furnaces use frequencies low enough to get adequate current penetration

.

Figure 1. Furnaces used for making pig iron and steels. RH side of open hearth furnace shows use use of oil oi l instead of gas

Automatic circulation of the melt in a vertical direction, due to eddy currents, promotes uniformity of analysis. Contamination by furnace gases is obviated and charges from 1 to 5 tonnes can be melted with resultant economy. Consequently, these electric furnaces are being used to produce high quality steels, such as ball bearing, bearing, stainless, magnet, die and tool steels.


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ACID AND BASIC STEELS The remaining methods for making steel do so by removing impurities impurities from pig iron or a mixture of pig iron and steel scrap. The impurities removed, however, depend on whether an acid (siliceous) or basic (limey) slag is used. An acid slag necessitates the use of an acid furnace lining (silica); a basic slag, a basic lining of magnesite or dolomite, with line in the charge. With an acid slag silicon, manganese and carbon only are removed by oxidation, consequently the raw material must not contain phosphorus and sulphur in amounts exceeding those permissible in the finished steel. In the basic processes, silicon, manganese, carbon, phosphorus and sulphur can be removed from the charge, but normally the raw material contains low silicon and high phosphorus contents. To remove the phosphorus phosphorus the bath of metal must be oxidised to a greater extent than in the corresponding acid process, and the final quality of the steel depends de pends very largely on the degree of this oxidation, before deoxidisers-ferro-manganese, ferro-silicon, aluminium-remove the soluble iron oxide and form other insoluble oxides, which produce non-metallic inclusions if they are not removed from the melt: 2Al + 3FeO (soluble) (sol uble)



3Fe + Al2O3 (solid)

In the acid processes, proce sses, deoxidation can take place in the furnaces, leaving a reason reaso nable time for the inclusions to rise into the slag and so be removed before casting. Whereas in the basic furnaces, deoxidation is rarely carried out in the presence of the slag, otherwise phosphorus would return to the metal. Deoxidation of the metal frequently takes place in the ladle, leaving only a short time for the deoxidation products to be removed. For these reasons acid steel is considered better than basic for certain purposes, such as large forging ingots and ball bearing steel. The introduction of vacuum degassing degassing hastened the decline decline of the acid processes.

BESSEMER STEEL In both the Acid Bessemer and Basic Bessemer (or Thomas) processes molten pig iron is refined by blowing air through it in an egg-shaped vessel, known as a converter, of 15-25 tonnes capacity (Fig. 1). The oxidation of the impurities raises the charge to a suitable temperature; which is therefore dependent on the composition of the raw material for its heat: 2% silicon in the acid and 1,5-2% phosphorus in the basic process is normally necessary to supply the heat. The "blowing" of the charge, which causes an intense flame at the mouth of the converter, takes about 25 minutes minutes and such a short interval makes exact control of the proce ss a little difficult. The Acid Bessemer suffered a decline in favour of the Acid Open Hearth steel process, mainly due to economic factors which in turn has been ousted by the basic electric arc furnace coupled with vacuum degassing. The Basic Bessemer process is used a great deal on the Continent for making, from a very suitable pig iron, a cheap class of steel, e.g. ship plates, structural sections. For making steel castings a modification known as a Tropenas converter is used, in which the air impinges on the surface of the metal from side tuyeres instead of from the bottom. The raw material is usually melted in a cupola and weighed amounts amounts charged into i nto the converter.

OPEN-HEARTH PROCESSES In the Siemens process, both acid and basic, the necessary heat for melting and working the charge is supplied by oil or gas. But the gas and air are preheated by regenerators, two on each side of the furnace, alternatively heated by the waste gases. The regenerators are chambers filled with checker brickwork, brickwork, brick and space alternating. ANALYSIS OF IRON & STEEL INDUSTRY OF PAKISTAN AND WORLD OVERVIEW BAHRIA UNIVERSITY OF BUSINESS & MANAGEMENT SCIENCE KARACHI

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The furnaces have a saucer-lik saucer-li ke hearth, with a capacity which varies from 600 tonnes for fixed, to 200 tonnes for tilting furnaces (Fig. ( Fig. 1). The raw materials consist essentially of pig iron (cold or molten) and scrap, together with lime in the basic process. To promote the oxidation of the impurities iron ore is charged into the melt although increasing use is being made of oxygen lancing. The time for working a charge varies from about 6 to 14 hours, and control is therefore much easier than in the case of the Bessemer process. The Basic Open Hearth process was used for the bulk of the chea per grades of steel, but there is a growing tendency to replace the OH furnace by large arc furnaces using a single slag process especially for melting scrap and coupled with vacuum degassing in some cases.

ELECTRIC ARC PROCESS The heat requir re quired ed in this process is generated by electric arcs struck between between carbon electrodes and the metal bath (Fig. 1). Usually, Usually, a charge of graded steel scrap is melted under an oxidising basic slag to remove the phosphorus. The impure slag is removed by tilting the furnace. A second limey slag is used to remove sulphur and to deoxidise the metal in the furnace. This results in a high degree of purification and high quality steel can be made, so long as gas absorption due to excessiv e xcessively ely high temperatures is avoided. This process is used extens e xtensively ively for making highly alloyed steel such as stainless, heat-resisting and high-speed steels. Oxygen lancing is often used for removing carbon in the presence of chromium and enables scrap stainless steel to be used. The nitrogen content of steels made by the Bessemer and electric arc processes is about 0,01-0,25% compared with about 0,002-0,008% in open hearth steels.

OXYGEN PROCESSES The high nitrogen content of Bessemer steel is a disadvantage for certain cold forming applications and continental works have, in recent years, developed modified processes in which oxygen replaces air. In Austria the LID process (LinzDonawitz) converts low phosphorus pig iron into steel by top blowing with an oxygen lance using a basic lined vessel (Fig. 2b). To avoid excessive heat scrap or ore is added. High quality steel is produced with low hydrogen and nitrogen (0,002%). A further modification of the process is to add lime powder to the oxygen jet (OLP process) when higher phosphorus pig is used. The Kaldo (Swedish) process uses top blowing with oxygen together with a basic lined rotating (30 rev/min) furnace to get efficient mixing (Fig. 2a). The use of oxygen allows the simultaneous removal of carbon and phosphorus from the (P, 1,85%) pig iron. Lime and ore are added. The German Rotor process uses a rotary furnace with two oxygen nozzles, one in the metal and one above it (Fig. 2c). The use of oxygen with steam (to reduce the temperature) in the traditional basic Bessemer process is also now widely used to produce low nitrogen steel. These new techniques produce produce steel with low percentages of N, S, P, which are quite competitive with open hearth quality.


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Other processes which are developing are the Fueloxygen-scrap, FOS process, and spray steelmaking which consists in pouring iron through a ring, the periphery of which is provided with jets through which oxygen and fluxes are blown in such a way as to "atomise" the iron, the large l arge surface to mass ratio provided in this way giving extremely rapid chemical refining and conversion to steel.

Figure 3. Methods of degassing molten steel

Vacuum degassing is also gaining ground for special alloys. Some 14 processes can be grouped as stream, ladle, mould and circulation (e.g. DH and RH) degassing methods, Fig. 3. The vacuum largely removes hydrogen, atmospheric and volatile impurities (Sn, Cu, Pb, Sb), reduces metal oxides by the C – O reaction and eliminates the oxides from normal deoxidisers and allows control of alloy composition to close limits. The clean metal produced is of a consistent high quality, with good properties in the transverse direction of rolled products. Bearing steels have greatly improved fatigue life and stainless steels can be made to lower carbon contents. Vacuum melting and ESR . The aircraft designer has continually called for new alloy steels of greater uniformity and reproducibility of properties with lower oxygen and sulphur contents. Complex alloy steels have a greater tendency to macro-segregation, and considerable difficulty exists in minimising the non-metallic inclusions and in accurately controlling the analysis of reactive elements such as Ti, Al, B. This problem led to the use of three processes of melting. melting.

(a) Vacuum induction melting within a tank for producing super alloys (Ni and Co base), in some cases for further remelting for investment casting. Pure materials are used and volatile tramp elements can be removed.

Figure 4. Typical vacuum arc remelting furnace

Figure 5. Electroslag remelting furnace

(b) Consumable electrode vacuum arc re-melting process (Fig. 4) originally used for titanium, was found to eliminate hydrogen, the A and V segregates and also the large silicate inclusions. This is due to the mode of solidification. The moving parts in aircraft engines are made by this ANALYSIS OF IRON & STEEL INDUSTRY OF PAKISTAN AND WORLD OVERVIEW BAHRIA UNIVERSITY OF BUSINESS & MANAGEMENT SCIENCE KARACHI

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process, due to the need for high strength cleanness, uniformity of properties, toughness and freedom from hydrogen and tramp elements. (c) Electroslag Electroslag refining (ESR) This process, which is a larger form of the original welding process, re-melts a preformed electrode of alloy into a water-cooled crucible, utilising the electrical resistance heating in a molten slag pool for the heat source (Fig. 5). The layer of slag around a round the ingot maintains vertical unidirectional freezing from the base. Tramp elements are not removed and lead may be picked up from the the slag. sla g.


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STEEL & IR ON INDUSTRY OF PAKISTAN (IN DEPTH ANALYSIS) PRICE one of the biggest problem of this sector, As Pakistan import Iron ores to make steel so as a rise in international prices the local prices also get effected, international prices have raised about 200% due to which steel prices were raised in Pakistan. The steel prices would have not raised in Pakistan even international market prices goes 400%high if Pak istan would be using local iron ore as Pakistan import iron ore so obviously change in international market effects the local market directly The rates of iron ore from which the steel was extracted in the steel mills had increased sharply in past five years from $27.83 per tonne in 2002-03 to $73.45 per tonne in 2007-08. The current rates were above $85 per tonne. The rates of billets that were the basic raw material for making steel products have increased from $360 per tonne in 2005 to $750 per tonne in 2007 200 7 and are still rising

PRICE OF IRON-ORE I RON-ORE IN PAKIST PAKISTAN AN $90.00 $80.00 $70.00 $60.00 $50.00 $40.00 $30.00 $20.00 $10.00 $0.00

$85 $73.45

$27.83

2002-03

2007-08

Current Rate

2 major things should be taken in consideration when determining the prices as prices mostly depend on production & operating cost to produce Steel, and the cost of Raw meterial 1) Energy source 2) Raw Material

Currently Pakistan is importing ore from Iran at 12% cheaper price as compared to what Pakistan use to import from India in 2003, If we somehow reduce the cost of energy the overall price can be reduced and if we use local iron ore we can save millions of foreign exchange resulting in reduction in prices of steel in Pakistan ANALYSIS OF IRON & STEEL INDUSTRY OF PAKISTAN AND WORLD OVERVIEW BAHRIA UNIVERSITY OF BUSINESS & MANAGEMENT SCIENCE KARACHI

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ENERGY S OURCES The prices T-iron, iron belts and other allied products of the steel industry have sharply increased as the current energy shortage in the country has almost stopped production at steel furnaces due to which production of steel was dropped and demand was not fulfilled so prices went high because High demand and low supply result in increase in prices

This stoppage has led to reduced supplies of raw material like iron billets and ingots to the steel re-rolling industry. Gas supply to around 140 steel furnace units, which are operating across the country mostly in Punjab, has been suspended for 16 days from January Ja nuary 3 to 18 after an acute energy crisis hit the country in the wake of violence after the death of former Prime Minister Benazir Bhutto.

Similarly, electricity load-shedding has halted regular production at 400 steel re-rolling factories(down steam mills), triggering an increase in prices of steel products because when downstream mills will be unable to produce steel as a result demand and supply would alter and as a result High demand and low supply result in increase in prices

During the last few days (VERY RECENTLY UPDATED NEWS), the prices of T-iron and iron belts increased by Rs 3,000 to Rs5,000 per metric (increased by 75% ) The market is anticipating anticipating further increase in prices of iron products in a couple of days as the raw material available to a few re-rolling mills will be exhausted exhausted,, causing their shortage.

A study conducted by The News revealed that after the death of Benazir Bhutto the steel industry, like other industries, was also badly affected. First , the supply of furnace oil was suspended and then gas and electricity load-shedding load-shedding added to the problems of the industry

In the re-rolling industry industry, a furnace takes a minimum of six hours to melt billets and ingots , but breakdown of power supply restricts the furnace from reaching the melting point . Once the furnace gets stopped due to power suspension, it takes the same time again to restart and reach the melting temperature which MULTIPLIES THE PRODUCTION COST. (This means that operating cost or production cost is increased reslting in increase in prices) On the other hand, the raw material once put into the furnace could not be

withdrawn till the melting process is completed. c ompleted. Repeated melting of a raw material reduces the quality of finished goods and increases the sales tax on the producers as the tax is imposed depending depending on how many times ti mes a furnace furnace is run ignoring i gnoring how many times a single raw material is melted due to any circumstances. This practice not only pushes up the cost of the steel re-rolling and melting industry industry,, but also enhances the ratio of wastage which is ultimately passed on to the consumers c onsumers

WRITEUP Pakistan Steel Mill Corporation (PSMC) uses national gas electricity to run the mill and furnace, but small downstream mills use electricity, it’s obvious that when small steel mills will get effected by energy crises, they won’t be able to do the required production which will result in not fulfilling the demand, which will

result in high prices due to shortage of supply with high demand of steel, secondly the electricity is getting ANALYSIS OF IRON & STEEL INDUSTRY OF PAKISTAN AND WORLD OVERVIEW BAHRIA UNIVERSITY OF BUSINESS & MANAGEMENT SCIENCE KARACHI

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so expensive that because of operating of operating cost the price of steel are getting high, high, national gas is also getting expensive, because national national gas when used for commercial use is very expensive as compared to used for household,, so it is our recommendation that Pakistan steel industry should look forward to use COAL as a household source of ene rgy, Pakistan is a land full of resources but still we don’t utilize these resources it’s our badluck.

In USA coal is used 40% in china 70% and India 30% and in Pakistan 1% if we use coal our all energy crises can end A local businessman dealing in coal mining told this scribe on the condition of anonymity that Baluchistan government provides subsidy to coal mine owners who pay only Rs100 a ton as sales tax when about 15-18 per cent a ton of coal is required to be paid as sales tax. He said, “ If local mine owners supply coal to

Pakistan Steel, they have to pay15-18 per cent a ton as sales tax to the government . Hence it is not costeffective to them and they prefer to sell coal to the cement sector or brick makers.

In reply to the question as to why indigen ous coal is not used by the PSM he said: “Technically, it is not feasible for Pakistan Pakistan Steel to use Baluchistan coal with larger sulphur content as it gathers in various parts of boiler. So we IMPORT COAL, the local coal cost around 3000rs while the imported coal cost 6000 , On the

other hand, it is no longer cost-effective for the Pakistan Steel to continue relying on imported coal, as its price has increased in the international market. mark et. What is feasible to mix the ch eap local coal with the imported one, hence the Pakistan Steel has planned to t o buy Baluchistan coal, he added. MOREOVER, THERE IS A STRONG LOBBY THAT FIERCELY RESISTED THE USE OF INDIGENOUS IRON OR COAL AND OTHER INPUTS AS THAT WOULD SLASH THEIR BUSINESS. APPROPRIATE TECHNOLOGY CAN MAKE RELATIVELY CHEAPER STEEL AVAILABLE FOR EXPORT AND FOR USE IN THE LOCAL MARKET FOR CONSTRUCTION, MANUFACTURING, ENGINEERING AND AUTOMOBILE SECTOR


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IRON ORE In following areas of Pakistan we have Iron ore Deposits KALABAGH IRON ORE (PUNJAB) CHINIOT IRON ORE (PUNJAB) NIZAMPUR IRON ORE (NWFP) DOMMEL NISAR IRON ORE (NWFP) PACHINKON IRON ORE (BALUCHISTAN) CHILIGAHAZI IRON ORE (BALUCHISTAN) CHAGHI IRON ORE (BALUCHISTAN) DILBAND IRON ORE (BALUCHISTAN)

DILBAND IRON ORE (BALUCHISTAN) (One of the best iron ores in regards to other iron ores in pak p ak) Found in 1997 by geological studies of Pakistan (GSP) they asked for immediately crash basis funds of Rs15million to complete the whole studies so that mining can be started, the development process has not even started even till ti ll today because the funds were never provided. The Investment of Rs-15million is bound to result in a minimum saving of Rs 375Milli on in foreign exchange opportunity annually. But we neglected to take this opportunity Pakistan Steel mill is importing 2million Tonnes of Ore annually from various countries at an average cost of 25$/ tonne, Pakistan steel can utlize 300000tonnes of raw dilband ore to meet mee t their annual requirement resulting in saving of $375 million ruppes/anum

CHINIOT IRON ORE (PUNJAB) Found in 1983 & development carried out in 1996 If used then Gross saving of foreign exchange ex change of about about US$30.75 Million can c an be saved but still not utilized

Out of all these ores none of them are in development phase such that iron ore can be extracted, though many of them are tested but none of them t hem have ever been utilized properly THE BIG Q UESTION The big question is why didn’t PSMC used Local i ron ore? Why it missed mi ssed these opportunities opportunities in past and still

is not utilizing it to maximum

According to PSMC they don ’t use local iron ore because it’s not up to standards," WE DONT EXPORT STEEL that we should be cautious about standards of white ppl " we use steel in local production, for local use, our cores are good enough to be used for local use, but still a lame reason not to utilize the opportunity at least if they don’t use them our cores can be mixed with imported cores, even this thing was not done in

past, uptil now due to scarcity of high prices of imported cores as they can’t afford now PSMC has started

mixing local ore with imported ore. ANALYSIS OF IRON & STEEL INDUSTRY OF PAKISTAN AND WORLD OVERVIEW BAHRIA UNIVERSITY OF BUSINESS & MANAGEMENT SCIENCE KARACHI

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The steel industry is chalking out plans to tap supply line of local iron ore and produce inexpensive steel as soaring international steel prices are eating up steel st eel industry margins threatening its very survival Pakistan would be in a position to utilize local iron ore comfortably in the next couple of years. Using local iron ore is an effort for the s urvival of steel industry of Pakistan Pakistan Utilizing local iron ore reserves was neglected in the past but now there are number of reasons to believe that industry and government are serious to do something. Pakistan has iron ore reserves but unfortunately they stay unutilized. Using local iron ore would reduce dependence on steel imports and support Pakistan Pakistan Steel Mills and other steel mills in the country

At present local steel mills are using scrap or imported raw material to make steel, unfortunately scrap and imported raw-material both have seen rise in prices, the rising iron ore prices are making it unviable to produce cheap steel products in the country. WRITEUP So we can Cleary say Pakistan is a land full of opportunities, there are huge raw material and resources available for Iron and steel sector to use, only if these resources are utilized and managed the result can be Huge saving of foreign exchange as well as rising prices of steel can be reduced by huge huge amount


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SWOT ANALYSIS STRENGTHS Development Development Projects: Dams, Bridges Bridges  Boom in Construction sector: sector: Real Estate  Defense Defense Production P roduction  Recently the country’s requirement for steel has increased due to the foreign investment in the real estate sector where world top enterprises are constructing massive commercial, residential and urban societies and reshaping Pakistan. These projects have a life line of around 20 years at least and this is Pakistan steel main stream and down stream major strengths. Secondly Government has also started huge development projects like many small and big dams are being built to meet the water requirement and work on improving infrastructure like bridges, industries is going on a large scale. Reconstruction of the earthquake affected areas is another major factor. 65 downstream steel mills are the major resource and strength for the main stream steel mill. Pakistan defense industry is relying mostly on domestic steel industry which is a major buyer of steel

WEAKNESSES Old Depreciated Plant and machinery  Limited Capacity to fulfill demand d emand  Lack of Infrastructure  High tax  Declining Skilled work force  Pakistan steel mill installations are very v ery old and near to scrap. sc rap. Those machineries cannot process indigenously acquired iron ore due to its extra raw nature. Pakistan needs to bring in some new machines so that we can utilize our own iron ore. Now a day Pakistan imports less raw iron ore which is very expensive but they have to import because their plant cannot take the load of Pakistani raw iron. There is a big gap and flaw in strategic planning. Further due to the lack of proper infrastructure in the iron ore areas is one big reason of not exploiting our own resource. Government G overnment says it’s too costly and besides those ar ea are in or very near to

tribal areas that is a major security threat to the people working on those reserves. Pakistan steel does not have enough capacity to meet the demand that also fuels the prices and which intern fuels the price hike in other downstream products directly and indirectly that affects the overall economy negatively. Due to high tax other industries especially coal is reluctant to supply steel mill with coal. This is a flaw in tax system where is the same coal company supplies coal to cement industry, sales tax would less. This discriminatory policy has to stop. Declining skill labors is another problem that steel industry is facing. For this government is taking few necessary steps to train workers


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OPPORTU NITIES Abundant Coal available to power Steel St eel Mills.  Abundant Iron ore Available domestically  Increase in prices and demand of steel world w ide  There is a matrix of attractiveness on figure below, b elow, where capacity of demand on domestic market have been reflected vertically, demand on regional market is reflected on the level. Branch of most promising products in terms of market capacity marked by yellow. In view of the fact that demand on national market is incommensurable on capacity with regional demand, it is necessary for organization of large-scale production attend to goods with high demand level l evel on regional market and opportunities of its export. Promisi ng products and market outlets of steel production. 1. Pipes, lances and hollow profiles, solid-drawn, steely st eely 2. Pipes and other lances (e.g., welded, riveted and/ or combined by similar way),with circular section, which external diameter more than 406,4 40 6,4 mm made from iron. 3. Sticks made from carbon steel, without further processing including sticks, spanned after rolling. 4. Flat roll stock 5. Sticks made from alloy-treated steel (except for stainless), other; angle sections, form and special shapes made from alloy-treated steel (except for stainless); hollow sticks for drilling operations made from alloy and non-alloy - treated steel. 6. Pipes, lances and other hollow profiles (e.g. with hollow joint or welded, riveted or combined similar way), made from iron; 7. Angle steel, form and special shapes made from carbon c arbon steel. China is most attractive market for delivery of Pakistan production. There is bottleneck of high quality steel production on China market. It is necessary to notice, that steel-casting China enterprises wide use importing iron ore and depend heavily on foreign suppliers. Competitive advantages of the Republic of Pakistan for China market are service availability own raw material supplies base, nearness of laying-out. Flat roll stock made from stainless and alloy-treated steel, used in machine-building industry can be promising products for delivery on China market upon condition of correlation of production to worldwide standards. Markets of Russian Federation and Iran are also attractive for delivery of Pakistan production. Promising products, represented represented at these markets mar kets are weldless pipes for oil and gas g as pipelines. pipel ines. However, it could not be depended on large volumes of delivery to these markets in mediumm edium- dated perspective


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The News reported that Pakistan’s steel industry is chalking out plans to tap supply line of local iron ore and

produce inexpensive steel as soaring international steel prices are eating up steel industry margins threatening its very survival. Soaring international steel prices are bringing changes in the steel industry that depends on imported imported raw materials and imported steel due to high demand and low production. Tuwairqi Steel Mills said that they t hey are seriously working to chalk out plan of using iron ore or e from Kalabagh and other reserves. Using local iron ore is an effort for the survival of steel industry of Pakistan." Pakistan Steel Mill is using iron ore from Chaghi, Balochistan apart from this there are many other places where PSM is working to get raw material. It had conducted its own study to find out the total steel production of Pakistan that was estimated at around 5.5 million tonnes in which long products share around 4 million tonnes and flat products accounts from 1.2 to 1.5 million tonnes. At present local steel mills are using scrap or imported raw material to make steel, unfortunately scrap and imported raw material both have seen rise in prices, the rising iron ore prices are making it unviable to produce cheap steel products in Pakistan. Increase in international prices is a opportunity and threat as well. Opportunity is that Pakistan can enter the export market provided there is well establish steel industry with no monopoly and after meeting the domestic demand. demand. Besides all this Pakistan Pakistan ahs abundant resources resources of coal and iron ore which which Pakistan needs to use efficiently.


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THREATS Political Instability  No competition on main stream  Increase in World iron ore prices 

The prices of steel industry have sharply increased as the current energy shortage in the country has almost stopped production at steel furnaces. This stoppage has led to reduced supplies of raw material like iron billets and ingots to the t he steel re-rolling industry. Gas supply to around 140 steel furnace units, which are operating across the country mostly in Punjab, has been suspended for 16 days from January 3 to 18 after an acute energy crisis hit the country in the wake of violence violence after the death d eath of former Prime Minister Benazir Bhutto. Bhutt o. Similarly, electricity load-shedding has halted regular production at 40 0 steel re-rolling factories, triggering an increase in prices of steel products. During the last few days, the prices of T-iron and iron belts increased by Rs3,000 to Rs5,000 per metric ton, reaching Rs48,000 to Rs50,000 compared to previous Rs43,000 to Rs45,000. The market is anticipating further increase in prices of iron products in a couple of days as the raw material available to a few re-rolling mills will be exhausted, causing their shortage. A study revealed that after the death of Benazir Bhutto the steel industry, like other industries, was also badly affected. First, the supply of furnace oil was suspended and then gas and electricity load-shedding added to the problems of the industry. The situation at composite plants, steel furnaces and steel re-rolling units combined is worse than on individual basis as gas supply to the composite plants has been completely suspended while those re-rolling units, which are operating separately, are getting gas supply. However, electricity load-shedding has stopped production at the re-rolling units. In the re-rolling industry, a furnace takes a minimum of six hours to melt billets and ingots, but breakdown of power supply restricts the furnace from reaching the melting point. Once the furnace gets stopped due to power suspension, it takes the same time again to restart and reach the melting temperature which multiplies the production cost. On the other hand, the raw material once put into the furnace could not be withdrawn till the melting process is completed. c ompleted. Repeated melting of a raw material reduces the quality of finished goods and increases the sales tax on the producers as the tax is imposed depending on how many times a furnace is run ignoring how many times a single raw material is melted due to any circumstances. This practice not only pushes up the cost of the steel


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re-rolling and melting industry, but also enhances the ratio of wastage which is ultimately passed on to the consumers. On an average, 150 daily-wagers work at a furnace unit or steel re-rolling factory and in total over 80,000 workers are employed on which around four lakh people depend. The stoppage of production has rendered the workers unemployed, causing resentment in the t he society. At present, around 40 industries are linked with the furnaces and steel re-rolling industry including the construction industry and auto parts’ makers which provide employment to a large number of people. In this scenario, the allied industries will also suffer, leading to further unemployment in the country. The steel sector in Islamabad is going through a phase of stern shortage of skilled pool of manpower. 'It will take a long time to meet the demands of the local industry' Engineering Development Board (EDB) CEO The PIAS is being established in coordination with public private partnership and each founding member contributed Rs. 1 million. The government also announced a grant. Seeing the shortage of labor in the steel industry, EDB has decided to take some measures regarding improvement in country's steel industry and a grant for the same has also been announced. The development development of steel st eel research and development institute is going to train t rain workers. Each year BHP Billiton, Rio Tinto and Brazil's CVRD sit down separately with the key steelmakers around the world and negotiate new iron ore prices which are accepted and adopted world wide making a price cartel. Remarkably, they come up with the same price increases, year after year. Last year, the price increase was 71.5 per cent. This year it is 19 per cent. Australia's ABC Online spoke to the head of CVRD's iron ore division, Jose Carlos Martins, to ask whether there is a cartel now in place for the supply of iron ore. The answer it seems is no: there is not a cartel in place. Rather, annual prices get set through so-called 'benchmark prices'. Like wise no competition in steel industry in Pakistan is exploiting consumers by determining unprecedented prices and producing low quality steel and taking to further steps to improve or enhance the producing capacity because of the monopoly and already working on extraordinary high profits or may be no profits but running on government aid because the Pakistan steel belongs to the government. It should not also be privatized but there should new invest in the th e privately owned steel mill. There is no major main steam private steel mill in Pakistan. That would also push the government to brush up its own own steel mill to keep up the competition and thus that would result in some good business in steel industry that would be beneficial for the public domestically and Pakistan will be in a position to go in the international market.


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STEEL SE CTOR CASE STUDY EYE OPENING FACTS It is perhaps our greatest misfortune that profitable steel projects based on local ore were carelessly shelved and then shamelessly forgotten. Instead, this impoverished country vainly celebrated ownership of a debtgenerating steel mill that depended on ore imported from the far-flung corners of the world. What follows is a brief overview of the false turns and blind bl ind alleys we have taken in the th e steel sector.

1. Kalabagh Steel Mill Project (1956, 1967): In 1956, M/S Krupp of Germany offered to set up a steel mill based on Kalabagh iron ore. Most of the other minerals, including coal, were available in a radius of only 11 miles from the proposed site. Unfortunately, the concerned minister from a steel-importing family managed to sabotage this project. Mr. Ghulam Farooq, the illustrious Chairman of the Pakistan Industrial Development Corporation, resigned in protest. Interestingly, this Kalabagh iron ore was of such high quality that in June 1966, M/S Salzgitter of Germany procured 15,000 tonnes of the ore, and produced 5,000 tonnes of quality steel which was brought by the world-famous automobile company, Volkswagen. Consequently, M/S Salzgitter offered to set up Kalabagh Steel Mill based on Kalabagh iron ore, and imported coal. This project was estimated to cost only Rs. 1.5 Billion. It adds to the credibility of the project that certain European banks offered to finance the project. Once again, the t he offer was rejected. In April 1968, President Ayub Khan accepted the Russian offer for Kalabagh Steel Mill project, and his successor President Yahya Khan inked the project agreement with Russia. However, it was later learnt that Russia did not possess the technology to produce steel from the Kalabagh iron ore. Common sense would indicate that German offers for the Kalabagh iron ore should have been revived. Instead, the site of the steel mill was uprooted, and shifted to Karachi. Not only was its machinery comparatively inferior, but it was also based on imported ore and coal. 2. Nokkundi Iron Ore Project (1972): In 1972, experts from China discovered a substantial quantity of high quality iron ore in Nokkundi, Balochistan. Steel experts from America and Japan confirmed its suitability for steel production. They, therefore, recommended that a mini steel mill be set up in Balochistan. Even till 1 999, offers from China and Iran were submitted to our government for this steel mill in Balochistan. Like the Kalabagh iron ore project, this too was never to see the light of day.

Pakistan Steel Mill (1985-): After the engineered demise of the Kalabagh Steel Mill and the Nokkundi iron ore projects, construction of Pakistan Steel Mill was commenced with an estimated cost of Rs. 8 Billion. It was completed in 1985, but only after the costs had soared by an additional Rs. 17 Billion. Moreover, while the installed capacity has been 1.1 million tonnes per year, the average utilization hovers around only 80% of this target. An enlightening comparison with a Brazilian Steel Mill dispels the belief that the fault lies only with the outdated machinery:


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St eel Mill 3. Table 1: Pakistan Steel Mill and The Brazilian Steel COMPARISION Year of completion Origin of Technology Employees Annual Annual Production (tonnes)

Pakistan Steel Mill 1985 Russia 28,000 0.8 million million

Brazilian Steel Mill 1956 Japan 13,000 4.3 million

4. Pakistan Steel Mill, Financial Considerations: In March 2002, the Public Accounts Committee announced that Pakistan Steel Mill had incurred a loss to the exchequer, in excess of Rs. 10 Billion. Subsequently, the Chairman of the Pakistan Steel Mill also confirmed payable loans of more than Rs. 19 Billion. The figures of the Public Accounts Committee may have been even higher if they had considered the initial investment of Rs. 24.7 Billion, frequent government grants, and loans converted to equity because Pakistan Steel Mill was totally unable to pay back even the bank interest on such loans. Whereas Pak Steel has never achieved its installed capacity to date, expansion plans are underway requiring the investment of an additional $1 to $2 Billion (Rs. 58 to 116 Billion ). Consequently, its already massive financial burden will be multiplied manifold. 5. Chairman Pakistan Steel Mills Corporation Vis a Vis Chairman Pak Steel Mill : Pakistan Steel Mills Corporation was established to develop steel sector on an all-Pakistan basis. Appropriately, Kalabagh and Nokkundi Steel Projects were transferred here from the PIDC. Unfortunately, the successive Chairmen of the Corporation concentrated only on the Pakistan Steel Mill, which, obviously, was the responsibility of the Managing Director Pak Steel Mill. Consequently, the steel sector with its confirmed feasible projects was ignored in other provinces of Pakistan. 6. The Modern Concept of Mini Steel Mills : According to "The Muslim" of July 29, 1996, an Italian "Danieli & Co." signed a contract with Philippines F. Jacinto Group of Companies to set up a state-of-the-art 1.2 mtpy Steel Mill (including supply, installation and commissioning) at an estimated cost of US $ 600 million. Clearly, a smaller steel mill of about 0.8 mtpy capacity should cost much less. This speaks in favor of setting up modern mini steel mills, based on local iron ores, in the provinces of Punjab, NWPF, and Baluchistan. Understandably, the preference of recent years is towards state-of-the-art mini steel mills, which are more cost-effective than larger mills, and are also much easier to modernize and upgrade, vide "Newsweek" of February 24, 1992 and "The News International" of April 6, 1991. 7. Parliamentary Committee for Steel Sector Development - A Suggestion: In view of the above, it may be desirable to constitute a Parliamentary Committee, comprising representatives from all the provinces, to consider ways and means to develop steel sector based on local iron ores. Foreign, federal and provincial experts may also be asked to assist. To achieve the desired objective, the committee may please consider the following suggestions also:


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A seminar may be held to examine various local iron ores suitable for steel production. Pak Steel Mill should achieve sustained utilization of its 1.1 mtpy installed production capacity, and then prove its financial viability to justify j ustify any consideration of its expansion. Pak Steel Mill should develop a suitable technology, in collaboration with research laboratories such as the PCSIR, to utilize local iron ore and coal. State-of-the-art mini-mills based on local iron ores may be considered for Punjab, NWFP, and Baluchistan to meet about 75% of our steel requiremen r equirements ts now being met through imports. Steel Sector Development Authority, with due representation of the provinces, may be established under administrative control of the Prime Minister to develop steel sector on all-Pakistan basis. However, Pak Steel Mill may continue to be administered by the Ministry of Industries and Production like other public sector industrial units. Conclusi on Due to either ignorance, or lack of interest, on the part of decision makers, feasible Kalabagh Steel Mill and Nokkundi iron ore projects were sidetracked and forgotten. Consequently, Pakistan lost o ver 20 years of steel making, thousands of employment opportunities for mining and transport of local ore, and untold billions of dollars in foreign exchange spending. It should be easier to revive such projects in light of modern technological advancements, adding much needed needed strength and self-reliance to the steel sector in Pakistan. Pak istan.


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PRIVATIZATION CASE Former Chairman of Pakistan Steel Mills, Lt. Gen. (r) Abdul Qayyum, who had been very close to Gen. ( r ) Musharraf has suggested Pervaiz Musharraf to give up his h is presidency himself. Abdul Qayyum whom Musharraf had appointed the Chairman of Pakistan Steel Mills while speaking in GEO program “Maray Mutabiq” last night, exposed that the disagreement between Musharraf and Chief Justice of

Pakistan Mr. Justice Iftikhar Muhammad Chaudry was started on the issue of privatization of Pakistan Steel Mills. The Supreme Court had cancelled the privatization of Pakistan Steel Mills last year. “The Chief Justice and the other judges who

were dealing with this case were very honest and knowledgeable”, said Abdul Qayyum. He added, “Former Prime Minister

of Pakistan Shoukat Aziz called me and asked me to favor the privatization of Pakistan Steel Mills before the Supreme Court, which I refused to do”. “Only the price of the land on which the Pakistan Steel Mills is situated is about Rs. 40000000000 (40 billion) while Musharraf’s Government was going to sell the whole project for Rs. 21000000000 (21 billion)”, said

Abdul Qayyum 5 years back undeveloped land of steel mill valued by the government around 1 million per acre. Its market value at that time was 2.5 million. If we even take the government value its least worth is Rs 18,000,000,000 as the total land owned by steel mill is 18000 acres. If we take the market price it’s at least worth is Rs 45,000,000,000. Not taking account of any of the developed land and installations of steel mills like plants, furnace, roads, bridges and steel town. How on earth it is valued at 21,000,000,000 after 5 years when its present original worth is well over 300,000,000,000. Secondly there was another foreign company who was to set up its steel plant 72km from Pakistan steel, and milestone was inaugurated a week before the bidding. Why was that same company bidding for Pakistan steel and which was accepted at 21 billion, it’s a scrap value. That company was trying to buy up its

competition to make its monopoly in Pakistan and control the military and strategic decision by manipulating its prices. It is possible that they would have dismantled the same old Pakistan steel mill and re fabricated again 72km away. It was cheap bargain and Pakistani government is responsible for this bake sale.


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ARTICLES & REFERENCES 1/10/2008 - IRON, STEEL PRODUCTS’ PRICES SHOOT UP - THE NEWS MEDIA LAHORE: The prices T-iron, iron belts and other allied products of the steel industry have sharply increased as the current energy shortage in the country has almost stopped production at steel furnaces. This stoppage has led to reduced supplies of raw material like iron billets and ingots to the steel re-rolling industry. Gas supply to around 140 steel furnace units, which are operating across the country mostly in Punjab, has been suspended for 16 days from January 3 to 18 after an acute energy crisis hit the country in the wake of violence after the death of former prime minister Benazir Bhutto. Similarly, electricity load-shedding has halted regular production at 400 steel re-rolling factories, triggering an increase in prices of steel products. During the last few days, the prices of T-iron and iron belts increased by Rs3,000 to Rs5,000 per metric ton, reaching Rs48,000 to Rs50,000 compared to previous Rs43,000 to Rs45,000. The market is anticipating further increase in prices of iron products in a couple of days as the raw material available to a few re-rolling mills will be exhausted, causing their shortage. A study conducted by The News revealed that after the death of Benazir Bhutto the steel industry, like other industries, was also badly affected. First, the supply of furnace oil was suspended and then gas and electricity load-shedding added to the problems of the industry. The situation at composite plants, steel furnaces and steel re-rolling units combined is worse than on individual basis as gas supply to the composite plants has been completely suspended while those re-rolling units, which are operating separately, separately, are getting gas supply. However, However, electricity load-shedding load -shedding has stopped production at the re-rolling units. In the re-rolling industry, a furnace takes a minimum of six hours to melt billets and ingots, but breakdown of power supply restricts the furnace from reaching the melting point. Once the furnace gets stopped due to powe r suspension, it takes the same time again to restart and reach the melting temperature which multiplies the production cost. On the other hand, the raw material once put into the furnace could not be withdrawn till the melting process is completed. Repeated Repeated melting of a raw material reduces the quality of finished goods and increases the sales tax on the producers as the tax is imposed depending on how many times a furnace is run ignoring how many times a single raw material is melted due to any circumstances. This practice not only pushes up the cost of the steel re-rolling and melting industry, but also enhances the ratio of wastage which is ultimately passed on to the consumers. On an average, 150 daily-wagers work at a furnace unit or steel re-rolling factory and in total over 80,000 workers are employed on which around four lakh people depend. The stoppage of production has rendered the workers unemployed, causing resentment in the society. At present, around 40 industries are linked with the furnaces and steel re-rolling industry including the construction industry and auto parts’ makers which provide employment to a large number of people. In this scenario, the allied

industries will also suffer, suffer, leading to further unemployment in the country. Reference: [http://www.thenews.com.pk/print1.asp?id=90268]


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04/27/2008 - STEEL INDUSTRY’S SURVIVAL LINKED TO USING LOCAL IRON ORE - THE JANG NEWS MEDIA

Sunday, April 27, 2008 KARACHI: The steel industry is chalking out plans to tap supply line of local iron ore and produce inexpensive steel as soaring international steel prices are eating up steel industry margins threatening its very survival. We are seriously working to chalk out plan of using iron ore from Kalabagh and other reserves, Tuwairqi Steel Mills Director Projects Zaigham Adil Rizvi told The News from Peshawar over phone. He hoped that Pakistan would be in a position to utilize local iron ore comfortably in the next couple of years. ÒUsing local iron ore is an effort for the survival of steel industry of Pakistan, he added. Soaring international steel prices are bringing changes in the steel industry that depends on imported raw materials and imported steel due to high demand and low production. A managing partner in re-rolling mills from Karachi said, ‘the efforts to utilise local iron ore for steel production seem serious, but considering the lethargic attitude of government one must not over estimate the recent developments and efforts that have been taken in this regard.’

He said that utilising local iron ore reserves was neglected in the past but now there are number of reasons to believe that industry and government are serious to do something. Pakistan has iron ore reserves but unfortunately they stay unutilised. Using local iron ore would reduce dependence on steel imports and support Pakistan Steel Mills and other steel mills in the country, he added. Pakistan Steel Mill (PSM) is using iron ore from Chaghi, Balochistan apart from this there are many other places where PSM is working to get raw material, PSM sources said. Sources in PSM said that PSM had conducted its own study to find out the total steel production of Pakistan that was estimated at around 5.5 million tonnes in which long products share around 4 million tonnes and flat products accounts from 1.2 to 1.5 million tonnes. According to a rough estimate, sources in PSM said there is a difference of about 2 million tonnes in demand and production of steel in Pakistan. When asked why no mega steel projects were launched, he said, ÒPakistan has done many researches for mega steel projects but unfortunately unfortunately these the projects were w ere never completed for number of reasons.Ó Using local raw material is now a very popular idea for the Pakistani steel sector as global steel prices are soaring pushing hard the local steel industry to find cheap and reliable raw material sources. At present local steel mills are using scrap or imported raw material to make steel, unfortunately scrap and imported raw-material both have seen rise in prices, the rising iron ore prices are making it unviable to produce cheap steel products in the country. Sources in PSM said that steel industry would run smoothly and attain sustainable growth by using more and more local raw materials. Experts Experts are expecting that Pakistan will achieve the target target of utilising 40 per cent of local raw material by 2010. China, the top steel producer is now producing over 450 million tonnes of steel and India is also expanding its steel production capacity from present present 50 million tonnes, unfortunately Pakistan is far behind in this important important sector.


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Investors in steel sector say that steel production in Pakistan is almost stagnant while demand is continuously increasing, which highlights the need of huge investment potential in this sector. India has very old history of steel industry far before its independence in 1947 while Pakistan started developing steel industry after its independence so there is a huge difference between the two steel industries of countries, sources in PSM said, adding ‘private sectors role is very crucial in establishing and developing steel industry in Pakistan.’ Reference: [http://thenews.jang.com.pk/daily_detail.asp?id=109173]


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MAY 25, 2008 - THE PAKISTAN STEEL MILLS IS IN THE EYE OF THE STORM – RUPPE NEWS MEDIA The Pakistan Steel Mills is in the eye of the storm, because its “sale” started the inevitable downfall of President

Musharraf. In the corruption scandal of the decade, Prime Minister Shaukat Azaz tried to pawn off the Steel Mill at a vew low price to an Indian conglomerate co nglomerate with a Russain front. Chief Justice Iftikhar Chaudhry Chaudh ry stopped the privatization of the Mills, which brought the wrath of General Musharraf who contrary to constitutional provisions dismissed the Judge in what is known as “extra constitutional measures” in Pakistan. Pakistanis across the political spectrum opposed the dismissal of the Judge as well the Musharraf’s second coup–this time against his own government.

To a question, Qayyum said once the then prime minister Shaukat Aziz summoned him and asked him to record a statement in favour of privatisation of the Steel Mills before the Supreme Court. “In response we will accommodate you

on a very lucrativ e post. I told h im, Sir, by making me such an offer you have disgraced me,” General Qayyum said. Lt Gen (retd) Abdul Qayyum further disclosed that once Shaukat Aziz called him on phone and asked him to engage Wasim Sajjad, Sharifuddin Pirzada and Abdul Hafiz Pirzada for the case. But I told him that I have engaged Kamal Azfar. They (Aziz) asked about the fee and I told him that he has engaged him for Rs 700,000 to which the then prime minister said that the Mills should pay Rs 6,200,000 to Wasim Sajjad, Rs 3,500,000 to Abdul Hafiz Pirzada and Sharifuddin Pirzada to be paid even above them. The former chairman of the Steel Mills said he told Shaukat Aziz that the price of only land of the Steel Mills was Rs 40 billion whereas he was fixing the price of whole the project at Rs 21 billion. This is too low, he further informed the prime minister. He said the prime minister turned a deaf ear to his view and insisted to wrap up the deal before long. Gen Qayyum said, “I then sent my written objections in a letter. H e sent me an insulting answer saying that it falls under their purview.” The News

Gen Qayyum said painfully that he did not know the reserved price. Some people participating in the bidding did know it, he said. Gen Qayyum expressed the view that Shaukat A ziz’s bad intention was involved in this matter and an FIR should be registered against him. Replying to a question, Gen Qayyum said he had tried thrice to meet the president to discuss this matter but he was not granted time. “Then one day I received a phone call saying that I should consider myself out of the job Reference [http://rupeenews.com/2008/05/25/pakistan-steel-mills-a-strategic-assett-in-the-eye-of-the-storm]


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IRON INDUSTRY OF PAKISTAN

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