Pakistan’s Steel Industry on brink of Collapse due to LCs

The Nation reported that Pakistan’s steel industry is facing a critical situation as the State Bank of Pakistan continues to fail in opening letters of credit, leading to the closure of numerous steel businesses and widespread job losses. The lack of LCs has caused a severe shortage of raw materials, leading to production delays and financial losses for companies. The steel industry is calling on the government and the State Bank of Pakistan to take immediate and drastic action to resolve the crisis. They are demanding that the State Bank of Pakistan open LCs at a curtailed level declared through a policy or circular as soon as possible to ensure the timely import of raw materials and the continuation of production. They also urge the government to provide significant financial assistance to the industry to help mitigate the catastrophic losses caused by the crisis. According to Pakistan Association of Large Steel Producers Secretary General Mr Wajid Bukhari “It is estimated that a total of approximately 7.5 million jobs are at stake because if there is no steel we will witness the subsequent closure of cement and all construction allied industries within a few weeks. Even during COVID-19, steel industry was categorized as an essential industry.” State Bank of Pakistan’s inability to open LCs is reportedly due to a shortage of foreign currency reserves, leading to delays in the import of essential raw materials such as scrap steel and additives to manufacture steel indigenously. In addition, the shortage of raw materials has led to a significant increase in the prices of steel products, making them unaffordable for many consumers. Steel bar prices have surpassed PKR 275,000 per tonne (USD 1020) but if the shortage persists, experts believe that the prices can easily cross PKR 300,000 per tonne. According to industry estimates, the steel sector in Pakistan employs over 200,000 people directly and has an annual production capacity of over 5 million tonnes.

Pakistan’s Steel Industry on brink of Collapse due to LCs

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