Ciena Group in talks to revive Tuwairqi Steel Mills with $700mln investment

Karachi, April 21, 2020: Ciena Group of USA has expressed its interest in reviving Tuwairqi Steel Mills Limited (TSML), a cutting-edge $ 340 million 1.28 MTPY Direct Reduction of Iron (DRI) plant which has been lying idle since 2013.

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 US$ 18.6 million. TSML had produced and sold 60,300 tons of DRI mostly in the domestic market on 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 MOU, GSA & IA that there is a requirement of a relevant Feedstock Gas Tariff for the DRI Plant of TSML. Since then the plant now for over six years has been continuously being kept in a fit to run condition through regular preventive maintenance, mothballing and cold commissioning as endorsed by MIDREX.

Ciena Group, with investments in telecom, IT, healthcare and sugar industries in different parts of the world, has expressed its interest in investing $700 million in TSML through forward and backward integration – employing around 5,000 professionals besides huge indirect opportunities and $ 974 million per annum foreign exchange savings due to import substitution.

The prospective investor has also agreed on the tariff of $ 4.65/MMBtu, practically zero subsidy tariff, and is also giving a relief to the government of Pakistan by investing further into the project without running the DRI plant. Accordingly, there would be no pressure on the GoP to supply gas for the initial period of three years, keeping in view the current gas scarcity issues.

Recently the Pakistan Steel Melters Association (PSMA) has also written a letter to the Prime Minister Imran Khan urging the revival of Tuwairqi Steel Mills and its expansion through backward and forward integration. As per PSMA’s letter, “the integration and operation of TSML will benefit the entire steel sector in Pakistan, besides transfer of technology and employment generation. 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.”

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As per industry experts, currently all the semi-finished flat steel for both strategic and commercial requirements of Pakistan is 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% on the indigenous resources of the raw material from Sindh/Baluchistan.

Moreover, experts also believe that Ciena Group intends to continue the unique approach employed by TSML of maximum possible in-house value addition which encourages transfer of technology, and exposure/development of engineers and technicians – resulting in huge CAPEX savings as well achieving self-sufficiency to eventually operate and maintain the plant without any foreign assistance as compared to conventional mode of lump sum turnkey projects usually seen in Pakistan where reliance is mostly on foreign human resource.

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