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Russia and Pakistan are working on a financing model for Pakistan Steel Mills (PSM) upgrade in Karachi, according to Sergei Tsivilev, the co-chair of the Russian-Pakistani intergovernmental commission. Tsivilev is also Russia’s energy minister. Pakistan is short of foreign currency assets.
PSM and Russian officials signed an MoU on cooperation for the plant’s modernization in the summer. The parties are currently working on further steps to implement the project. Tsivilev said “We are looking at building a metallurgical plant at the PSM site using local raw materials.”
The steel plant was built in the 1970s with assistance from the USSR. According to financial statements for the 2023 financial year, the plant has been in debt since at least 2008, and production capacity has now been shut down. At the time of its closure, the plant’s production capacity was estimated at 1.1 million tonnes of steel per year. When operational, it is among Pakistan’s largest industrial mega-corporation complexes. At its height, it employed 30,000 workers. It is currently under state control.
Pakistan hoped to sign an agreement with Russia to modernize and expand Pakistan Steel Mills back in 2013. At that time, the investment requirement was estimated at US$450 million. Karachi is on the Persian Gulf and PSM products have the potential to help both Pakistan’s industrial and manufacturing in addition to provide regional exports and much-needed foreign capital.
In March 2006, a consortium of Magnitogorsk Iron & Steel Works , Al-Tuwairqi and Arif Habib Group won an auction for 75% of Pakistan Steel, offering US$362 million. But local protests prevented the deal from going forward and the Pakistan Supreme Court annulled the auction results. It remains to be seen whether the plant can be re-commissioned and put back to work – much depends upon the capital requirements and what Russia will view as a high risk investment, although Pakistan government involvement should help provide some guarantees.
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