PALSP sounds alarm on soaring steel smuggling, under-invoicing

ISLAMABAD: The Pakistan Association of Large Steel Producers (PALSP) has raised alarms over the resumption of large-scale smuggling, misdeclaration and under-invoicing of steel from Iran. In an SOS letter to the finance minister, PALSP urged that smuggling, mis-declaration and under-invoicing are destroying the local steel industry, which is being perpetrated in the most organized manner.

‘Our steel industry is fighting for sheer survival due to massive Pak rupee depreciation, highest financial costs, highest power rates coupled with a significant increase in input costs. As a result, many steel mills have shut down their operations and the remaining are working at a small fraction of their capacities and many more are on the verge of closure.’ PALSP, an association working for the revival of the local steel industry by engaging Govt as well as leading players of the local steel industry, stated that the steel melting industry is the backbone of the steel industry which is facing multiple challenges. To find an alternative to survive in these difficult times, key players in the long steel industry are diversifying into exports of non-ferrous products (copper ingots) to China, and this segment emerged as the 5th largest exporting sector with exports touching $1.350 billion in 2023-24.

One of the members of the PALSP is the largest exporter of copper and many more are pursuing similar targets. PALSP fears that in case unchecked smuggling continues by organized mafias, this would severely damage the exporting ability of copper products and at the same time would endanger their survival. PALSP warned that due to the economic downturn construction activity is at a grinding halt, and the steel demand is at the lowest possible level. In this situation, the resumption of smuggling of steel with full might is an alarming development, which is going to create further devastation for the steel sector as well as our economy. PALSP raised concerns and stated that the perpetuation of smuggling & misdeclaration at such a massive scale is a question mark for those authorities who are deputed at the Customs Checkposts, and borders and are mandated to stop any kind of wrongdoings.

PALSP stated that approximately 500,000 MT of steel was being smuggled primarily from Iran (also via Afghanistan) annually to Pakistan, which is approx. 10% of the total steel being produced in the country. On the other hand, during the last over10-15 years, annually, 0.5 (half million) mln MT to 1 mln MT of new (re-usable without melting)/ steel (as per verifiable evidence/ declared by exporting countries) is annually being brought into Pakistan by mis-declaring it as scrap by the Customs authorities. According to the Iranian government’s rules, the export of scrap to any other country is strictly disallowed. According to estimates, smuggling and misdeclaration of steel from Iran and the rest of the world results in a colossal revenue loss of around Rs 40 billion to the exchequer annually. This could create implications for our country in money laundering-related issues, as Pakistan and Iran do not have any formal banking channels for this purpose. This raises another question as to how foreign exchange is being arranged for bringing smuggled/mis-declared steel from Iran.