50,000 tons of fine ore from Big World Trading: PSM Board hasn't approved direct spot procurement

Pakistan Steel Mills (PSM) Board has not approved direct spot procurement of 50,000 tons of fine ore from M/s Big World Trading, USA worth millions of dollars after a number of queries raised by the Ministry of Production and the price committee, official sources told Business Recorder.
The Board which met in Islamabad under the chairmanship of Fazalullah Qureshi discussed one point agenda: PSM's losses will reach Rs 50 billion at the end of current fiscal year as operation of the mill is almost zero due to financial constraints. Minister for Production, Anwar Ali Cheema, is also visiting PSM on Wednesday (today) to witness on ground situation and look for prospects for new appointments for his favourites.
Chairman of the Board, who has restricted himself to operational matters, is unaware how many have been hired on the instructions of the minister, informed sources maintained. The sources said the Board was apprised that M/s ICIOC, Iran was requested to load fine iron ore for the quarter January-March 2012 but they have not confirmed Pakistan's proposed schedule with the plea that no schedule of PSM will be confirmed prior to release of their 10 percent balance of payments of shipment loaded during year 2009-10 and 2010-11.
The sources said, PSM admitted that the 10 percent balance payments could not be released by PSM till date due to financial crunch; hence, no supply from M/s ICIOC, Iran has been effected since October 2011 till date. On the other hand, as per contract M/s Ehya Sepahan Mining & Industries Complex Co, the material could not be taken as per schedule due to non-opening of LC for the shipments of lump and fine for the 3rd quarter 2011 ie October-December 2011.
For the 1st quarter ie January-March 2012 M/s. Ehya Sepahan Mining & Industries Complex Co, Iran have agreed to load the cargo of 20,000 MT (lump) with nomination of vessel on CFFO basis with schedule of ETA Bin Qasim 22.02.2012 (+/- 05 days). This quantity is not sufficient to increase production.
A delegation of Pakistan Steel was scheduled to visit Iran by 17 February 2012 to resolve the issues of ICIOC and to obtain an earliest possible lay can but they have not been granted visas so far. Pakistan Steel has been making efforts for procurement of iron ore both on long term and spot basis.
These efforts are as follows: Long term contract: Since 2007, at least eight times tenders were floated or opening date extended but only two contract could be signed ie M/s ICIOC, Iran 400,000MT per annum in 2008 and M/s Ehya Sepahan Iran, 350,000MT Fines and 110,000MT lump per annum in 2011.
According to sources participation in the long term tender was very poor, due to which procurement procedure was modified. Tender for balance quantities was opened on 17.01.2012 which is under process. All 10 participants are traders and mine owners have not participated. The case is expected to be finalised by April 2012 and the supplies are expected in May-June 2012.
ii) Spot tenders: Tenders were floated or extended at least 13 times in 2010 to 2011, but there was little or no participation and the cases could not materialise as the participants did not provide required information.
iii) Several times over a 100 letters were sent by GM (BMD), A/PEO(Commercial) and A/CEO to different potential iron ore mine owners and iron ore producers requesting them to participate in tenders or give their direct offers for supply of iron ore but no positive response was received.
While going through previous direct offer and the offers received in the tendering it was observed that M/s. Big World can be a potential supplier and their offer in tender No BMD/03/IOL/2011, could not be finalized due to the fact that they did not provide past track record on time. On these basis and taking into consideration the emergent requirement of Pakistan Steel an e-mail was sent on 31st January 2012, to M/s. Big World and in response they offered a spot supply of iron ore fine quantity 50,000 MT (+/- 10%), vide email on the specification matching the PSM requirement already recommended by the Production Directorate.
M/s Big World also participated in tender No: BMD/49/6th Gen/2012-15/11, which is under scrutinising process. Some of the important factors of their present offer / proposal are as follows: (i) They offered material on CFFO basis with rebate of $04 on FOBT price based on My Steel Indexation, and the freight to be paid at actual as per chartered party agreement, as per prevailing international freight; (ii) they have proposed port of loading ie Subic (with loading capacity of 20,000 MT / day);(iii) mode of payment based on 100% payment of cargo on 30 days usance LC and the payment will be made on the basis of discharge port analysis; and (iv) the offer also indicates parameters of the (02) mine operators who are Philippine based and both having production capacity of more than 200,000MT / month.
Hot Metal Department through its note of February 08, 2012 revealed the extremely emergent stock position of Iron Ores and mentioned that: The stock of iron ores (lump and Fine) has been depleted to awfully low level. As on 08 Feb'2012, the stock of lump ore is 5,500 tons, where as that of fresh fine ore is nil. Hectic efforts have been made to collect the dropped old iron ores along various conveyor tracks which is being mixed with Fe bearing re-cycling waste ie the mill scale, sludge, fine sinter etc. The total stock of mixed fine material is about 120,000MT. The above material is being utilised cautiously for prolonged survival operation of two blast furnaces thus achieving production of hot metal of about 400 to 600MT/day.
PSM argues that under the circumstances the management advised to call a meeting of Price Committee to consider/ finalise the proposal of M/s Big World Trading Co USA, to seek approval of Price Committee for entering into contract with the aforementioned supplier being emergent requirement of iron ore fine to increase the production capacity, under PPRA Rules 42(d) (iii).
PSM's management submitted a procurement method of negotiated tendering. A procuring agency may engage in negotiated tendering with one or more suppliers or contractors with or without prior publication of a procurement notification. However, the mills maintain that for reasons of extreme urgency brought about by events unforeseeable by the procuring agency, the time limits laid down for open and limited bidding methods can not be met. The circumstances invoked to justify extreme urgency must not be attributable to the procuring agency.
The agenda and working paper for the subject procurement was forwarded to Convenor of Price Committee meeting along with other members. However, in response to the agenda working paper for the meeting of price committee, the Convenor of the Committee Engr. Memon Abdul Jabbar has advised and recommended that keeping the balance between urgent requirement and the mode of meeting requirement based on spot and emergent purchase, an urgent meeting of the board to get approval of this spot and emergent purchase maybe convened.
He further stated that the approval of this order relates to a considerable amount based on My Steel $130/MT which would be a spot purchase of about $6.5 million. The Board discussed the proposal and decided to defer it and prefer to purchase local iron ore produced in Balochistan.