Nigeria steel industry: Opportunities, challenges

Nigeria spends about $3.3 billion importing steel every year, according to official government data.  Africa’s biggest economy has 30 steel manufacturers but they can only produce 2.2 million tons a year with scraps and billets imported mainly from China.

An average of steel products such as standard plates, hot-rolled coil, cold-rolled coil and rebar is $464.7 using Chinese prices, which means Nigeria imports roughly 7.1 million metric tonnes of steel annually, according to Real Sector Watch’s calculations.

China is currently world’s biggest steel maker, accounting for 50.3 percent of 1.6 billion tons of crude steel produced globally in 2015. Within the same year, China’s steel exports hit 110 million metric tons, 20.5 percent rise from 2014. Though China is today hard hit by overcapacity in production, trade restrictions in the USA and Europe, the country still determines global prices.

It is easier to dismiss China and argue that it is wrong to compare it with Nigeria, but China developed comprehensive industrial policies and implemented them for decades religiously to achieve results.

For instance, China adopted a set of steel-specific policies in 2005, with a target to dominate world output. According to the policy, developed by Ma Kai, China’s director of National Development and Reform Commission, the country targeted to elevate iron and steel products to first satisfy the requirements of industries, construction companies, railways, and machinery makers, among others.

“By 2005, the comprehensive energy consumption for each ton of steel shall be lowered to 0.76 ton of standard coal. The comparable energy for each ton of standard coal and the water consumption for each ton of steel shall be lowered to less than 12 tons in the whole industry,” the document says.

In fact, the policy pushed Chinese steel firms to see external market in continents where infrastructure demands were high.

The targets in the documents have been largely achieved.   China developed a Go-Out Policy in 2009, which encouraged firms to explore opportunities in Africa and other continents, Gedion Jalata, programme director of Africa-China Dialogue Platform, Oxfam International, told Real Sector Watch.

Away from China. India has developed a steel sector-specific policy and is betting on higher spending on infrastructure and construction via government initiatives to drive steel demand and raise capacity utilisation, according to India Ratings and Research in a report as reported by Economic Times of India. This is targeted at achieving steel demand of 230 million tons by 2030, from 122 million tonnes in 2015 -2016. Part of the strategy is to protect local industries from cheap imports. Government is giving preference to domestic steel firms in infrastructure contract awards. The country exported 8.24 million tonnes of steel in 2016, 102 percent jump from 4.07 million tonnes the previous year, according to the country’s steel ministry report.

Nigeria has $300 billion infrastructure gap which presents opportunities for domestic steel makers. The country has a need for railways, roads, power sector development and mining which are sectors that patronise steel.

Privately owned steel companies are tapping into the opportunities, pumping billions of naira into building new plants as the needs for housing, road and bridge construction expand in the country.

“We have invested $500 million in Nigeria. We believe that steel sector is the backbone of any major economy in the world.  Without steel, there cannot be any other industry in the real sector of any economy,” said Raj Gupta, chairman of African Industries Limited, which has 12 subsidiaries, including African SteelMills, Ikorodu Steel Mills, African Foundries, and Abuja Steel Mills.

Similarly, Aarti Steel Nigeria Limited has completed a cold-rolled mill in Ota, Ogun State, with a capacity to produce 120,000 tonnes of products per annum.

The steel maker spent roughly N11 billion to complete the mill in March this year. The mill is expected to serve the downstream steel makers in Nigeria using cold-rolled steelproducts for the production of home appliances, roofing sheets, metal furniture and filling cabinets, tables and chairs, among others.

Already, Standard Metallurgical Company Limited (SMC) is set to launch a billet mill to produce standard wire rods in Nigeria. The mill will likely create 1000 jobs in the country.

The steel sector pumped N1.69 trillion into the Nigerian economy from 2013 to 2015, said the Manufacturers Association of Nigeria (MAN).

However, the federal government has not been able to revive Ajaokuta steel company years after it was built in 1979. It is also dithering on privatising it or entering into a joint venture with a private company to revive it.

According to Gupta, earlier cited, the Nigerian steel sector is hard hit by poor funding, low demand and poor doing business environment which raises production costs.

Frank Udemba Jacobs, president of MAN, said a steel industry can supply over 60 percent of inputs required by industries and lack of its development is responsible for the poor state of manufacturing today and perennial struggle in import of raw materials.

ODINAKA ANUDU