US-based groups to revive TSM $600-$700M Potential Investment
After coming into production in January 2013, TSML’s DRI plant had to be shut down in September same year. By that time, TSML had produced and sold 60,300 tons of DRI mostly in the domestic market, but evidently on loss for the higher gas tariff of feedstock. TSML sustained an operational loss of $18.6 million in 2013.
DRI plant was constructed with an investment of $340 million, and made operational with a capacity of 1.28 million tons per year.
“Since then the plant, now for over six years, has continuously been kept in a fit-to-run condition,” an industry official said. “It is in the interest of the country that the project be revived with a total FDI (foreign direct investment) of over $1 billion and job creation for around 5,000 people.”
In November last year, ministry of industries forwarded a plan to the economic coordination committee for the revival of the TSML, proposing cheap gas supply, tax exemptions and threshold for new investment to make the state-of-the-art steel mill operational.
A US-based group-Ciena-has expressed interest in reviving Tuwairqi Steel Mills Limited (TSML) and waiting for a green signal form the government to initiate investment process for the country’s first-ever Direct Reduction of Iron (DRI) plant, which has been lying idle since 2013 due to gas tariff issue.
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Industry sources said the prospective investor has not only agreed to invest further in TSML but also willing to settle the gas tariff issue.
Ciena Group, having massive investments in healthcare, information technology, telecom and sugar industries in different parts of the world, has expressed interest in investing some $600 to $700 million in TSML through forward and backward integration. As per the revival plan, the group would also employ around 4,000 to 5,000 professionals besides huge indirect job opportunities for Pakistani entrepreneurs.
TSML, a cutting edge $ 340 million with a capacity of some 1.28 metric tons per year DRI plant, has been lying idle since 2013. This is a foreign direct investment project by Al-Tuwairqi Group of Companies at Bin Qasim, Karachi over an area of 220 acres.
After coming into production in January 2013, TSML’s DRI plant had to be shut down in September 2013 after sustaining an operational loss of $ 18.6 million. Initially, TSML produced and sold 60,300 tons of DRI mostly in the domestic market in loss for the higher feedstock gas tariff.
According to the Gas Sale Agreement (GSA) & Implementation Agreement (IA), the tariff would be as determined by Ogra. In 2013, Ogra gave its verdict after examining Memorandum of Understanding (MoU), GSA & IA that there is a requirement of a relevant Feedstock Gas Tariff for the DRI plant of TSML.
Since then the production of the plant stays shut, however, the plant for over six years has been continuously being kept in a fit-to-run condition through regular preventive maintenance, mothballing and cold commissioning.
Sources said the Ciena Group has also agreed on the tariff of $4.65/MMBTU, practically zero subsidy tariff and is also keen to invest further in the project without running the DRI plant. Accordingly, there would be no pressure on the government to supply gas for the initial period of three years, keeping in view the current gas scarcity issues.
Moreover, industry experts also believed that Ciena Group intends to encourage transfer of technology, and exposure/development of engineers and technicians resulting in huge capital expenditure savings as well achieving self-sufficiency to eventually operate and maintain the plant without any foreign assistance. Presently, the group is waiting for a green signal from the government of Pakistan to run the plant, sources said. As per industry sources the revival of TSML will save over $950 million per annum foreign exchange as it can produce import substitution products.
Pakistan Steel Melters Association (PSMA) is also advocating the revival of the steel mill and its expansion through backward and forward integration.
Recently, PSMA has also written a letter to Prime Minister Imran Khan urging the revival of Tuwairqi Steel Mills and its expansion through backward and forward integration.
According to PSMA’s letter, the integration and operation of TSML will benefit the entire steel sector in Pakistan, besides transferring technology and employment generation. “We support the revival of Tuwairqi Steel Mills and its expansion through backward and forward integration. The association believes that TSML’s advanced technology could supply gas-based DRI meant primarily for clean steel making and producing high grade billets and rebars. TSML has the capacity to produce other products, including alloy steel primarily focused on import substitution, the letter maintained. As per industry experts, all the semi-finished flat steel for both strategic and commercial requirements of Pakistan is currently being imported. TSML, being first of its nature and kind infrastructural nature Greenfield Project in private sector can provide significant import substitution of this semi-finished steel, while relying 100 percent on the indigenous resources of raw material from Sindh/Balochistan.