A few Chinese steel firms have conducted valuation exercise of Pakistan Steel Mills (PSM) in the last two weeks to acquire the sick steel complex with the aim to expand their manufacturing operation in the region, sources informed The News. "Chinese and/or their local representatives are still making random visits to evaluate its worth initially a delegation of nine people visited each and every department/plant and held detailed meetings with the departmental heads and workers to know almost everything about it," said a PSM official.
The delegates were representing companies, including Sinosteel Corporation, China Machine, Sinomach, and SDM Shandong, it was learnt.
"Chinese investors would soon submit detailed proposals to acquire the mills, and expand its production on modern lines. The investors have mulled taking over PSM under the $46 billion China-Pakistan Economic Corridor project," the official added.
Further, Chinese firms were considering investing up to $2 billion in the Russian made PSM. "They might be given majority shares if the government institutions, including the Privatisation Commission, and Economic Coordination Committee of the Cabinet, find the awaited proposals feasible," the PSM official said.
Pakistan is a big market for Chinese steel, as envisaged by increased imports from there in recent months and the likely acquisition would save Chinese firms the transportation cost. "Pakistan itself is a market of around eight million tonne steel per annum, while installed capacity of Pakistan Steel is 1.1 million tonne the steel complex has given no production in the last two months due to multiple crises there," informed an industry source.
"The location of Pakistan's steel complex is ideal. It is built very much close to a seaport (Port Qasim), it has a built-in railways system, and there is no shortage of water around the mills as well this all makes acquisition for any firm very much cost effective," the source added.
It has been learnt that during the last week of July, the delegation was briefed about PSM by Industries and Production Minister Ghulam Murtaza Jatoi with PSM Chief Executive Officer Zaheer Ahmed Khan in attendance.
Another source, however, said Chinese evaluation is in violation of Pakistan's privatisation rules. "How can any firm conduct evaluation before the financial advisor submits the financial evaluation report?"
The financial advisor on PSM is scheduled to submit the evaluation report in November 2015. Then the government can invite interested parties to conduct their evaluation exercise. "If the government would do anything in violation of the regulation we would oppose it and challenge in the court of law," the source said.
The advisory consortium on PSM consists of China Development Bank Securities Co Ltd, Pak-China Investment Company Limited, Iqbal A Nanjee and Co Pvt Limited, Sinosteel, Abacus Consulting Technology (Pvt) Ltd, Cornelius, Lane and Mufti and PWC CA.
The government plans to sell the PSM by January 2016.
Russia and its ambassador to Pakistan had shown keen interest to invest over a billion dollars in PSM to acquire it. The country had also offered a loan for PSM expansion. Some six months ago, the government of Pakistan asked them to participate in the forthcoming privatisation process.
A survey conducted by Anjum Adil and Associates projected the worth of PSM land (19,019 acre), plant and equipment at Rs122 billion against Rs70 billion in 2011-12. The PSM plants and equipments are set up roughly at an area of 10,000 acres of land.
The state-run mills mostly produce hot-rolled coils. Other finished products include cold-rolled coils, billets, and pig iron. In total, it has the capability to produce some 12 products.
The International Monetary Fund, under the ongoing bailout package of $6.2 billion to support the country's economy, has asked the government to privatise the loss-making state enterprises. The Fund hopes privatisation will plug holes in the public purse and make the companies more efficient.
Source: The News
