Shortage of raw materials, incompetency: PSM production drops to 25 percent
By: Mawaiz Khan Akash
The country's single largest steel producer Pakistan Steel Mills Corporation (PSMC) is facing severe raw material crisis, which has pulled down its production to about 25 percent due to low stocks of raw material, mismanagement and non-technical directors.

They said that stocks of iron ore (fine) and iron ore (lamp)--basic raw material for the production of steel products--have been reduced almost to end, which has forced the management to reduce its production. Sources said that despite low stocks of raw material, the management of PSMC has not taken serious notice and deliberately delayed the import of raw material and shortage of raw material has occurred third time during last 15 months.

Usually Pakistan Steel requires some 4,500-5,000 tons of raw material (fine ore and lamp ore) on daily basis for steel production process. However, at present the corporation has only a few thousand tons stocks of basic raw material, which has compelled the management to reduce production and enhance the rest time of both blast furnaces.

As per technical point of view, a blend of raw material comprising 30 percent iron ore (lamp) and 70 percent iron ore (fine) is mainly used for the steel production, sources said. However, they said, due to shortage of fine ore, the PSMC management is using more quantity of lamp ore instead of fine ore, which is also damaging the billions of rupees worth plant.

"Normally, blast furnace is closed for steel production about 15-20 hours a day for rest purposes, but right now it is being closed for over 30 hours, as Pakistan Steel has limited stock of raw material and to avoid any mishap due to excess use of lamp ore," sources said.

Under Standard Operating Procedure (SOP) rules, PSMC should have 60-90 days' stock of raw material to run the mill. However, at present PSMC has some 5,000-8,000 tons stocks of fine ore and about 10,000-15,000 tons of lamp ore, sufficient only for next four to five days in normal operational process.

Therefore, management of Pakistan Steel is utilising least raw material for continued production process, resultantly the present corporation's production capacity has decreased to 25 percent, which was average 70 percent during last fiscal year.

Sources said that PSMC's production is gradually decreasing for last few months and it was 30 percent in July 2009 and 60 percent in August, while at present it is being worked at 20-25 percent. Meanwhile, Pakistan Steel claimed that it has over 40,000 tons stocks of raw material and current production capacity stands at 45-50 percent.

"We have 43,000 tons stocks of fine ore and lamp ore, which will be sufficient for next 15 to 20 days, as PSMC is daily utilising 1,500-2,000 tons of raw material," said Shafi Hyder, head of public relations.

He said that annual demand of raw material, including fine ore and lamp ore, is 1.6 million tons, and two ships from Iran, carrying some 90,000-95,000 tons of fine ore is expected to reach Karachi on October 5 and October 12 with a grace period of three days.

"PS management is running the plant at low capacity due to shortage of raw material. However, the situation is under control and during the last 24 hours we have produced some 11 heats," he added. Talking about the financial position, he said that PSMC has already utilised Rs 10 billion acquired from banks and now expenses are being managed through sales, which stand at Rs 3 billion, down from Rs 5 billion.