Nigeria’s steel sector struggles as prices, demand crash
Nigeria’s steel sector is reeling under the heavy weight of falling global prices as well as local and international demand crash.
The sector that holds key to opening the doors of other industries in Nigeria also suffers from policy inconsistency and somersaults, which prevent investors from making required commitments.
“We are not doing well, owing to low demand,” said Raj Gupta, chairman, African Industries Group, a consortium of 12 companies, including six steel plants.
“If the demand picks up, we will be able to go back to our activities. The demand is low at the moment, and it has been low for a year. Most of the construction companies have not been paid for the jobs they have done. Once the construction companies are paid, they pay our dues which are outstanding and place new orders,” Gupta told Real Sector Watch.
“Internationally, steel is going through a very rough time. Just like oil, most of the commodities are in all-time low, and steel is in a similar situation,” he added.
The global steel industry contracted by 2.8 percent as output reached 1.62 billion tonnes in 2015. This was the first time this was happening since 2009.
China produced 2.3 percent less steel at 803.8 million tonnes in 2015 and became desperate to sell amid low global demand.
This hit steel prices and firms across the world while stunting producers’ forecasts.
The steel sector encompasses makers of primary and secondary aluminium products, cold rolled coils, wire rods, enamel ware, galvanised iron and steel, nail and wire, steel pipes and steel.
Frank Udemba Jacobs, president, Manufacturers Association of Nigeria, recently said that policy inconsistency has set in the steel sector.
Manufacturers say the state of Ajaokuta Steel Complex does not help the steel sector.
According to them, in spite of over $5 billion sunk in Ajaokuta Steel Complex Limited, the complex is yet to be completed. This may have been caused by a legal tussle between the erstwhile concessionaire and the Federal Government, they say. The implication of this situation is that over 60 percent of manufacturing equipment, which could have been obtained from the complex, are imported from abroad.
“An iron and steel complex is essential in kick-starting the industrial process in the country,” said Frank Udemba Jacobs, president, Manufacturers Association of Nigeria, in an industrial memorandum made available to BusinessDay.
“Government should work towards the speedy removal of all impediments to the full privatisation of the steel complex,” Jacobs said.
Closely trailing the Ajaokuta Steel Complex is the Aluminium Smelter Company, located in Akwa Ibom State, which, like Ajaokuta, is caught in a legal war between the concessionaire and the federal government.
Oluyinka Kufile, Chairman, Basic Metal, Iron and Steel Group of the Manufacturers Association of Nigeria (MAN), and chairman, Qualitec Industries Limited, said that this is frustrating aluminium producers and is preventing them from getting ingots, a basic raw material, locally.
“We need that resolved. Aluminium Smelter Company needs to be re-started so that we can get ingots for local roofing sheets manufacturers,” Kufile told BusinessDay in an interview.
Steel makers pay for gas used at factories in dollars, rather than naira. This situation has continued to impact their bottom lines negatively. To end this situation, they say gas users in the sector need to be given 30 percent discount as gas price in the country should be at par with the international price.
“We need to look at payment of gas in dollars,” said Jide Mike, former director-general, MAN, and consultant to WEMPCO Steel, during an annual general meeting of the group held last Thursday in Lagos.
Mohammed Musa Sada, immediate past minister for mines and steel development, had said that there were staff in the complex engaged in the repair of cement plants and bolts, but industry players say the complex is not doing its primary job, which is the production of steel, billets, iron and other products that are constantly being imported by manufacturers.
Kamoru Ibitoye Yusuf,CEO of Kam industries, which operates a large cold roll mill in Ilorin, Kwara state, said
the country needs a consistent policy on duty rates so as to attract more investments to the cold rolling mills in Nigeria.
“It is from cold rolling mills that base materials for making automobile panels and other components are derived, so if you encourage investment in this sector it will galvanise local auto production and generate jobs,” Tusuf said.
“Iron rods have been protected by 50 percent duty, cold roll has not been protected. That is the reason investors are running away from that end of the business. One cold rolling mill can sustain 50 to 100 local industries which will create jobs,” he added.
ODINAKA ANUDU