After years of stagnation, losses, and failed revival attempts, Pakistan Steel Mills (PSM) may finally be moving towards a concrete solution. Pakistan and Russia, through their Joint Inter-Government Commission (IGC), have signed a second protocol aimed at reviving the long-defunct steel giant.
The agreement marks an important step, as both sides have now agreed to prepare a bankable Engineering, Procurement, and Construction (EPC) contract, which is essential to attract serious investors.
The decision was taken during the 10th meeting of the Pakistan-Russia IGC held in November 2025, attended by senior officials from Pakistan’s Ministry of Industries and Production and their Russian counterparts.
According to official sources, the government is clear on one point: it does not want to run Pakistan Steel Mills anymore. Instead, the plan is to revive the project, make it financially viable, and then privatize it, while fully facilitating local and international investors.
The government has set aside 700 acres of land belonging to Pakistan Steel Mills (PSM) for its revival or for setting up a new steel mill.
Pakistan Steel Mills started facing heavy losses in 2008–09, mainly due to the global economic slowdown and other issues. That year alone, the mill suffered a record loss of Rs26.45 billion. Between 2008–09 and 2014–15, the government provided about Rs59 billion in bailout funds, but the mill could not resume operations and was shut down in 2015.
Since June 2024, the government has taken steps to cut ongoing losses. These include stopping gas supply from SSGC to protect coke oven batteries, reducing staff numbers, and ending bulk electricity and water supply connections. Officials say these measures have helped lower operational losses while plans for revival or a new facility are considered.
At Pakistan’s request, Russia has presented two revival options. The first is based on the blast furnace model, with an estimated cost of USD 1.91 billion. Though expensive upfront, this option is considered more economical in the long run because it allows Pakistan to use its own iron ore reserves.
The second option involves building a new mill using Electric Arc Furnace (EAF) technology, costing around USD 1–1.05 billion. While cheaper initially, this model relies entirely on imported steel scrap, making Pakistan vulnerable to global price shocks and foreign exchange pressure.
Despite possessing 1.887 billion tons of iron ore reserves, Pakistan currently imports nearly USD 6 billion worth of iron, steel, and scrap every year. The gap between domestic production and demand stood at 3.1 million tons last year, highlighting the heavy need for a functional steel industry. Pakistan’s steel sector also suffers from fragmentation, with around 600 small, inefficient units using outdated technology.
The Ministry of Industries is also working with the Ministry of Maritime Affairs on an ambitious plan called the “Sea to Steel Green Maritime Industrial Corridor” at Port Qasim.
The project includes reviving the inactive Iron Ore and Coal Berth (IOCB) and developing a modern ship recycling and repair facility. Steel recovered from dismantled ships would feed into PSM or nearby processing units, reducing imports and saving precious foreign exchange.
As per estimates, this integrated approach could cut steel imports by 20 percent and save over USD 13 billion in the next decade. With steel demand expected to grow by 6 percent annually until 2035, reviving PSM is no longer just an industrial choice — it is an economic necessity.