Pakistan on Thursday shortlisted four Chinese firms – all top-notch global steel producers – for selling a majority stake of the closed Pakistan Steel Mills (PSM) amid inordinate delay in formally splitting the unit into two that may further prolong its privatisation.

Baosteel Group and a consortium of Tianjin Jianlong Iron and Steel Industry Company Limited and Metallurgical Construction Corporation (MCC) of China are among the shortlisted investors, which are leading names in the steel and construction sectors of the world.

Out of the six bidders that showed interest in acquiring PSM, the Privatisation Commission (PC) board disqualified Russian and Iranian companies.

Privatisation Minister Mohammad Mian Soomro chaired his last board meeting after the cabinet removed him in November last year and appointed Mohammad Saleem in his place as the board chairman.

The government had also tried to accommodate Saleem two years ago but the move could not materialise. The Pakistan Tehreek-eInsaf (PTI) government has decided to keep at least 26% stake in Steel Corp – a new subsidiary of PSM – and sell a majority stake of 51-74% to private bidders.

The PC board deliberated on a report pertaining to the pre-qualification of potential investors for the revival of PSM, according to a statement issued by the Ministry of Privatisation after the meeting.

It said that six parties submitted the Statement of Qualification and the PC board granted approval for pre-qualified investors and parties.

The pre-qualified parties “are leading international investors of sound rating and it is welcoming that they expressed interest in investing in the revival of PSM,” said the ministry.

Shortlisted bidders

The board approved the shortlisting of Baosteel Group Xinjiang Bayi Iron and Steel Company, which is owned by the Chinese government.

The company’s annual revenues were $3.8 billion and it had assets of over $8 billion as of December 2020.

The group’s company that submitted the bid has annual steel production capacity of 7 million tons. The second pre-qualified bidder is Tangshan Donghua Iron and Steel Enterprise Group Company Limited that has $1.3 billion worth of assets and annual revenues of $18 billion.

The company has annual production capacity of 15 million tons of iron, steel and rolled steel.

A consortium has also been shortlisted for the bidding process, which comprises Tianjin Jianlong Iron and Steel Industry Company Limited and Metallurgical Construction Corporation (MCC) of China.

The Jianlong Group has nearly $23 billion of assets along with annual sales of over $29 billion and production capacity of 35 million tons per annum.

The MCC Group has $77 billion worth of assets and attracts $61.3 billion in annual sales. MCC is the world’s largest and strongest metallurgical construction contractor.

It was ranked 65th in the Fortune Global 500 and 8th in ENR’s top 250 global contractors, according to the financial advisers’ report. Combined assets of Jianlong and MCC Groups are $100 billion with annual sales of $90 billion in 2020, according to the financial advisers.

The fourth shortlisted investor is Maanshan Iron and Steel Company Limited, which is also owned by the Chinese government.

The company has $12.4 billion of assets and annual sales of $12.5 billion.

It has an annual production capacity of 60.5 million tons of pig iron, crude steel and steel products.

Disqualified firms

The board endorsed the financial advisers’ recommendation to disqualify the consortium of Pakistan State Oil and MetProm Group that had also shown interest in acquiring the majority stake in PSM.

Metprom is a Russian firm that has annual sales of $138 million and assets of only $71 million.

Isfahan Steel Company (ESCO) of Iran had also shown interest in acquiring the majority stake but the board did not shortlist it. It is the largest manufacturer of construction and steel products in Iran.

The company had $4.8 billion in revenues and an asset base of $4.8 billion as of March 2021. It has 3.6 million tons of steel production capacity.

The company has been disqualified due to non-provision of documents related to a resolution of the board supporting the acquisition and attested certificate by the Pakistani embassy in Iran.

The last Pakistan Muslim League-Nawaz (PML-N) government had shut down PSM in June 2015.

Last year, the federal cabinet approved the splitting of PSM into two entities but the process could not be completed.

The cabinet had decided that the liabilities of PSM would remain with the existing company, including Rs71.3 billion owed to Sui Southern Gas Company (SSGC) and Rs67.2 billion owed to the National Bank of Pakistan as of December 2020.

The cabinet also directed NBP and SSGC to give noobjection certificates for splitting PSM into two companies when the Scheme of Arrangement was filed with the Securities and Exchange Commission of Pakistan.

However, the process remains incomplete.