Posco Venture Said to Seek Buyer for Idled Pakistan Steel Millby
Tuwairqi Steel Mills inaugurated in 2013 is non-operational
Tuwairqi hires U.S.-based consultants to value plant
Tuwairqi Steel Mills Ltd., a venture between Posco and Saudi Arabia’a Al-Tuwairqi Group, is seeking a buyer for its two-year-old, non-operational plant in Pakistan, a company official with direct knowledge of the matter said.
The Karachi-based company has hired consultants in the U.S. to value the mill, which was built at a cost of $340 million, the person said asking not to be identified because the process is private. Tuwairqi Steel Mills reported a loss of $18.6 million in 2013, which increased to $22 million the following year, the company said in a statement by e-mail.
Tuwairqi Steel never began production as it failed to reach an agreement with the government on the purchase price of natural gas to run the plant, the person said. The project was the biggest investment in Pakistan’s steel industry since at least 2002, said Shumaila Badar, head of research at Ismail Iqbal Securities. The failed venture underscores challenges Prime Minister Nawaz Sharif’s faces as he seeks to lure overseas investment, which fell 24 percent in October.
Foreign direct investment into Pakistan “has been quite anemic for quite a few years now,” Muneeba Shoaib, an economist at AKD Securities Ltd. said in a phone interview. “With these structural issues, security threats, there aren’t many incentives for investors to come in.”
Tuwairqi Steel, which is 84 percent owned by Saudi Arabia’s Al-Tuwairqi Group with South Korea’s Posco controlling the rest, has a capacity to produce 1.28 million tons of steel a year. State-run Pakistan Steel Mills Co. has a capacity to produce 1.1 million tons, according to its website.
Abdul Rauf Khan, administration head at the plant, and Posco declined to comment on the sale. Al-Tuwairqi Holding didn’t immediately respond to an e-mail. Sher Ayub Khan, spokesman for the Industry Ministry, referred questions on the gas price issue to the Ministry of Petroleum. A call to Arshad Mirza, the secretary at the Petroleum Ministry wasn’t returned.
Standard Chartered Plc estimates Pakistan’s economy to expand 4.4 percent in the year ending in June, after a 4.2 percent growth a year earlier. The country’s foreign reserves reached a record $20 billion in October.