Way out of steel manufacturing logjam

If Ajaokuta Steel Company will not work, if the adjoining steel rolling mills will not fly, something has to work; something must take its place. A number of steel companies sprang up to fill the gap created. This had to play out. To do otherwise would have meant turning economics on its head. The likes of African Steel Mills Limited, African Foundries Limited, Verod Steel Limited and lately, WEMPCO Steel Mill Limited, and several others, came in to fill the gap created by the failure of Ajaokuta and Co. All these are playing out in the secondary sector of the steel sector. Ajaokuta is a primary sector.

The plan to develop the iron and steel sector began with the Yakubu Gowon regime with the formation of National Steel Development Authority (NSDA) in 1971. Basir Borodo, former president, Manufacturers Association of Nigeria, and currently president, West African Manufacturers Association who has been a player in the Nigerian industrial sector for over 40 years attested to this.

The mandate of the authority was essentially to develop the steel sector. What followed was the formation of various steel companies during the General Muritala Mohammed/Obasanjo regime. These companies started realising their potential during the Shehu Shagari regime. The companies include Ajaokuta Steel Company, Kogi State; National Iron Ore Mining Company, Itakpe, Kogi State; Delta Steel Company, Ovwian Aladja, Delta Steel; Jos Steel Rolling Company, Jos, Plateau State; Katsina Steel Rolling Company, Katsina State; Oshogbo Steel Rolling Company, Osun State; National Steel Raw Materials Exploration Agency, Kaduna State; National Metallurgical Development Centre, Jos Plateau State, and Metallurgical Training Institute Onitsha, Anambra State. But they never realised their full potential.

The Western world

Through their institutions, the World Bank and International Monetary Fund (IMF), amplified the story: Development of the steel industry in third-world countries which includes Nigeria, to them is not uneconomical and so should not be touched, should not be considered.

They drew on the sham David Ricardo theory of comparative cost advantage that Africa should not develop steel industry but should export their raw materials to the metropolitan West and buy finished steel from them. The Soviet Union agreed to develop the iron and steel industry for Nigeria; the civil works given to the West grounded it.

Borodo corroborated this West’s sham stand when he recalled that some of his professors in Nigerian universities (professors from the West) in the 60s said Nigeria should not consider having steel plants that we were not right for it, “whereas they had steel plants in their own countries.”

Ajaokuta steel plant project and the adjoining steel rolling mills are thus stalled today. Ajaokuta has gone through many hands – the Ajaokuta plant was 90 percent built by Russia’s Tyazyproexport and designed to use local ore and imported coal. Nigeria signed a concession agreement in August last year with Ispat Unit Global Infrastructure Holding Ltd to revive the uncompleted 1.3 million tons-per-year mill after the collapse of an earlier $3.6 billion 10-year deal with UK-registered Solgas Energy Limited. What we witnessed thereafter was the plundering of the plant’s machinery.

The primary sector is steel manufacturing with iron ore as raw material, whereas secondary is cold rolling mill – importation of steel ingots and flat sheets that serve as raw materials; and recycling of steel scraps which African Foundries Limited specialises in. These are processed into various steel products.

WEMPCO (and perhaps other cold steel rolling mills too) however is set to change the story going by recent revelations at the commissioning of WEMPCO Steel Mill Limited recently by President Goodluck Jonathan at Ibafon, Ogun State. The president assured existing investors in the steel sector of government support “as we collectively strive for self-sufficiency in local steel production.”

He said: “I strongly believe that self-sufficiency will open major downstream sector activities with attendant massive job opportunities and economic empowerment for our engineers, technicians, artisans, fabricators alike.” This is a spin-off from the Minerals and Metals Development Road Map, which was recently presented to the general public, one that stipulates time-bound targets for the minerals and metals sector. This document articulates the strategies to be adopted to ensure the accomplishment of the set objectives of increasing steel production in Nigeria, which is targeted at 3 million tons of liquid steel production by the end of this year and progressively increase to 12 million tons of liquid steel by the year 2020.

The WEMPCO Steel Rolling Mill is worth $1.5 billion and capable of producing 700,000 metric tons of steel annually. According to the company’s group managing director, Lewis Tung, the production capacity of the steel mill represents 65 percent of the 1.2 million of steel used annually in Nigeria, mostly imported.

Tung said the mill, which would begin the production of cold rolled (flat steel), would depend on imported steel billets for raw materials “until it could work out how to transport iron ore from Itakpe in Kogi State.” Thus, government and private sector players in the steel industry have agreed the private sector would now play largely in the secondary stage of steel manufacturing – cold steel rolling milling will now show interest in backward integration.

So, if Ajaokuta will not fly, the private sector steel manufacturers will fly. And this will be a challenge to Ajaokuta. In fact, Yung said, “We realise that importing these products costs a lot of foreign exchange and we thought that since the raw materials are available locally, producing them locally will help conserve foreign exchange.”

The challenge now

The challenge now is to make Ajaokuta work and let there be a linkage to the rolling mills. There are 15 of them now we are told. Borodo said, “If you can get Ajaokuta right, WEMPCO and other rolling mills will benefit. The rolling mills and Ajaokuta should integrate.” He said the issue was raised by the president and WEMPCO said they were ready. He added that if Ajaokuta was left the way it was now for five/six years, the likes of WEMPCO would move and Ajaokuta will never be able to catch up with it.”

All things being well, we will now have an integrated steel sector – a linkage between downstream and upstream sub-sectors of the industry. With this, we have a full steel story, and not a single story that depicts a lame duck steel sector.

SIAKA MOMOH