Ship carrying iron ore for PSM set off even before opening of L/C

Another ship, MV Lancylot of M/s Cargill International, carrying 55,000 metric tons of iron ore for Pakistan Steel Mills (PSM) will dock at Port Qasim’s Pakistan Steel Jetty on Tuesday (tomorrow) but it is not known how the ship commenced its journey to Karachi without opening of confirmed Letter of Credit (L/C) by a government-owned company. 

Well informed sources told Business Recorder that the ship, which was reportedly destined for China immediately diverted towards Pakistan when ‘someone’ asked the company to bring this ship to Karachi for Pakistan Steel Mills (PSM). 

These sources claim that PSM opened L/C for the ship 10 days after the ship left for Karachi. 

“How can a government company guarantee to a private company to bring materials of $8 million (Rs 0.8 billion) without opening L/C,” questioned a mercantile trading expert. 

Insiders claim that the company was to get $0.65 million less from China which implies that they would earn this amount from PSM. “International contracts must be executed in terms of balancing risks against the liabilities,” he added. 

The sources said, National Bank of Pakistan (NBP) extended Rs 3 billion L/C facility on the instructions of new Finance Minister, Salim Mandviwalla as his predecessor had resisted taking any such risk. 

Earlier, NBP made it clear that it would not extend L/C facility until the Economic Co-ordination Committee (ECC) of the Cabinet provides a guarantee as the PSM is unable to repay due to dismal financial position. 

The ECC was informed on February 22, 2013 that PSM signed three contracts on C&F basis for supply of iron ore of 50,000 (plus minus 10 percent). M/s Cargill have supplied 55000 tons iron ore (fine) against first contract, and the associated shipment arrived on February 20, 2013. Supplies against two remaining contracts with M/s Cargill and M/s Swiss Singapore are pending for further processing due to non-availability of funds for opening of L/Cs which depends on restoration of Rs 3 billion L/C facility. 

Chief Executive Officer (CEO), PSM, Major General Muhammad Javed (retired) apprised the Minister for Production Anwar Ali Cheema a couple of months ago that a delegation from Cargill visited PSM and details of mill’s requirements and operations were discussed in group meetings. According to him, Cargill had agreed to participate in the next tender for spot purchase and subsequently in tender of long term contract. 

According to official documents, ECC was further informed that under the bailout package for PSM, two tranches amounting to Rs 3.8 billion and Rs 5.05 billion have been received by the entity. 

This correspondent attempted to reach out CEO PSM for comments and sent a message to him, but he did not reply till the filing of the story. 

Sources said that L/C for M/s Cargill was opened in $172 per ton. M/S Al-Shahab ship DD Sunrise 6500 tons waiting from PSM since February 22, 2013. 

PSM Board of Directors’ price committee will consider the case of Al-Shahab on Monday at Rs 13700 per ton. BWT case is not on the agenda as the supplier is being punished for offering low price of $120 per ton as compared to $172 per ton of M/s Cargill as some suspicious activities are on in the PSM. 

Copyright Business Recorder, 2013

Muhammad Ramzan Rafique
Muhammad Ramzan Rafique

I am from a small town Chichawatni, Sahiwal, Punjab , Pakistan, studied from University of Agriculture Faisalabad, on my mission to explore world I am in Denmark these days..

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