Return of the metals  

The once moribund Delta Steel is now alive and kicking, having been rehabilitated by Premium Mines and Steel. The steel plant holds enormous economic benefits for Nigeria, writes ODINAKA ANUDU.

 

Two big signposts welcome visitors to Aladja. They both contain five words: Welcome to Premium Steel City. An eagle-eyed visitor will easily notice, at the entrance of Aladja, that the company’s name is written in bolder letters than the town’s.

This is, perhaps, a signal that the community is as significant as the steel plant.

It is a humongous plant that sits on 172 hectares of land, traversing Ovwian and Aladja, two communities in Udu Local Government Area of Delta State.

It is a well-guarded plant, with heavy presence of police officers and soldiers.

At the gate of the steel plant, uniformed security guards hand in registers to incoming visitors and even staff members to sign their names.

Like in the good old days, the plant is located in a place that can best be described as a typical Nigerian village. Commuters often have to stand in front of the steel plant for a number of minutes before getting commercial vehicles and tricycles.

The roads can also be lonely at times owing to low economic activities going on around the complex.

The people of Ovwian and Aladja are very careful and sometimes suspicious. They understand when someone is trying to force words out of their mouths.

It is 10.25 am and two villagers have already walked out on this correspondent for being asked to talk about the steel complex. It is said that the Aladja people are warriors and, so, think intelligently. Perhaps, their war heroics make them suspect every move.

Date is Friday, June 22, 2018. The administrative block houses staff members who provide management and marketing services. No bank is in the complex for now, but a small-scale company known as Steadfast Investment Limited provides money transfer services to interested staff.

The complex is like one big village and can be very difficult to cover barefooted. This correspondent, therefore, is driven to the heavy duty section, where production takes place, by someone heading in the direction.

Moving from one department to another can be really tasking. A staff member who needs to visit the production section from the administrative block will have to drive or wait till someone else, moving in that direction, drives towards the segment.

The production segment consists of several departments, including the rolling mill, which currently rolls steel into iron rods.

The sizes of the iron rods range from 12 millimetres (mm), 16mm, 20mm, to 25mm and 32mm.

The rolling mill is where ore goes into the blast furnace. Production of iron rods is a very complex industrial process, which also involves blowing the hot air through nozzles.

The rolling mill is, as usual, very hot. Cold water can become hot for a tea meal in 15 minutes within the mill. Human rights lawyers fighting for noise control can be deaf in the steel mill in 20 minutes.

 

Noise emitted by compressor casing, gear box, discharge and suction ducting, intercooler, moisture separator and lubrication system can cause a health havoc. But this is how it is in China, India, the United States and other steel manufacturing countries.

Here, Indians and Nigerians work together. Indians provide a direction and Nigerians do the execution. However, one significant thing about Premium Steel is that Indians themselves are actively part of the whole industrial process, which gives room for technology transfer.

There is a quality control department within the rolling mill. This department ensures that iron rods produced meet certain acceptable standards.

One source in the company says that the production segment employs roughly 160 workers. More workers will join once other departments kick off, the source says.

The company is producing iron rods, but it is already confronted by the realities of the Nigerian market, populated by cheap Chinese steel.

Low manganese

Chinese iron rods are 20 percent cheaper than locally produced ones and Nigerian manufacturers are devising ways to beat them.

Premium Steel, consequently, reduces the manganese content of its iron rods to between 50 and 72 percent, from 90 to 120 percent quality of the 1990s, insiders say.

Apart from competition with China, another reason given by someone familiar with the situation is that the price of manganese, which determines the strength of iron rods, is very high and it is nearly impossible to survive with 1990s standards in today’s market.

This situation is also affecting aluminium makers in the country who now consistently reduce the millimetres of roofing sheets to compete favourably in the market.

“But it also has a negative implication for the quality of infrastructure and housing projects we do in Nigeria today,” says one respondent.

For a company that re-opened in March, producing iron rods three months after is not a small feat.

Beside the rolling mill is the steel melting shop, which is where the hot metal turns into steel by a combined blowing process. This segment is, however, not working at the moment.

Another section involves pelletising and beneficiating plants, where pellets are moulded and raw materials converted into semi-finished steel. These are not working, independent findings show.

Others are direct reduction plant (made up of two modules), continuous casting shop, air separation plant and the foundry, which are likewise not working at the moment.

 

Company’s target

Insiders say the steel company is targeting one million metric tonnes (MT) of liquid steel, 950,000 MT of billets and over 300,000 MT of rolled products when all the segments in the complex kick-start again.

This was the capacity of the plant in 1980s and the firm is planning to reinstate it. The company is also looking at producing automobile spare parts in the future, an insider says.

This may not be far from the truth given that it was Delta Steel Company that supplied spare parts to Peugeot Automobile in Kaduna in the 1980s and 1990s.

These targets may, however, be far-flung, owing to the fact that the Nigerian economy of the 1980s and 1990s were not as dependent on importation as that of today.

History

The once Delta Steel Complex was set up in 1982 to produce steel and supply raw materials to rolling mills at Jos, Katsina, Ajaokuta and others.

However, poor management and corruption dealt a big blow on the company, resulting in low capacity utilisation and losses.

 

The company shut down in 1995, owing banks and backlog of salaries to workers, amounting to over N10 billion. Many of the workers incidentally died without getting rewards for their hard work, findings show.

It was later sold to Global Steel Holdings, also known as Global Infrastructure, the firm currently managing Itakpe Iron Ore, for $30 million, after a bidding process.

The company was severally accused by villagers of asset stripping and bad management. The company was said to have borrowed over N25 billion from various banks.

“Global just went ahead borrowing money from banks and stripping the assets of the company, which was quite unfortunate,” someone familiar with the sale of the company says.

In 2008, President Musa Yar’Adua (now late) revoked the sale of the assets to Global Infrastructure.

After the establishment of the Asset Management Company of Nigeria (AMCON) in 2010, the bad bank took over the debts and repaid them. AMCON sold it to Premium Steel, after resolving issues of debts, salaries and dissent from Ovwian and Aladja people.

 

Communities, staff complaining

BusinessDay interestingly finds that many villagers are not happy with Premium Mines and Steel.

One reason is that they believe that the sale of the complex to Premium Mines and Steel was faulty and compromised. They claim that while the company bought the old Delta Steel at N28 billion from AMCON in 2014, China Polaris had bidden N33 billion and should have won the bid.

However, Mustapha Chike-Obi, former chief executive of AMCON, had earlier debunked this allegation, saying that Premium Steel was the highest bidder.

“We are also not happy that AMCON did not give us our 10 percent share before selling it to Premium Steel,” one villager, Samuel Emuhu, says.

It is understood that Global Infrastructure gave the communities 10 percent share in the company, but experts wonder if this was one of the reasons the company struggled.

More so, many staff members working for Premium Steel say they have not been given letters of appointment, meaning that their jobs are not secure.

Another staff member says that Premium Steel employs people from different parts of Nigeria and India, but does not consider the people in whose towns the complex is located.

 

What N600bn can do

Premium Steel is currently investing N600 billion to make the humongous firm work again.

By reviving the steel complex again, experts say the federal government needs to hand over moribund firms to serious and experienced investors.

“This model must extend to once publicly-owned but now moribund and badly managed facilities such as Ajaokuta Steel Complex, Aluminium Smelter Company, Nigeria Paper Mill, Nigerian National Paper Manufacturing Company, Federal Superphosphate Fertilizer Company and National Steel Raw Materials Exploration Agency, among many others,” Ike Ibeabuchi, managing director of a chemical manufacturing outfit, MD Limited, says.

 

Company’s commitment

The steel company is planning big and wants to capture the Nigerian market.

Prasnata Mishra, managing director of Premium Steel, says the company’s one million metric tonnes liquid steel capacity plant was once responsible for reinforcing Nigeria with steel and allied products.

“We are targeting at least 5,000 jobs directly and indirectly. We shall touch the lives of over 30,000 Nigerians in the first instance before we start calculating the secondary opportunities it creates,” Mishra says.

 

“This was left in terrible state as the plant was in a total shambles and deplorable shape when Premium Steel acquired it. We, therefore, retooled it with state-of-the-art equipment for competitive production,” he adds.

 

Opportunities beckon

Nigeria is a land of opportunities. Someone refers to the country as an untapped goldmine.

For a steel company like Premium Steel, Nigeria’s demographic strength is an opportunity.

Apart from its 198 million people, housing deficit is estimated at 17 million.

 

More so, the National Infrastructure Master Plan recommends that Nigeria must spend $3 trillion to bridge its infrastructure gap.

The country also needs to spend five percent of its gross domestic product (GDP) to ensure that homes, roads, bridges and dams are built for a population growing at 2.6 percent annually, according to World Bank estimates.

“This is an opportunity for companies in Nigeria,” says Yemi Osinbajo, Nigeria’s vice president.

 

Hurdles to cross

 

Like many manufacturers, Premium Steel has to contend with policy somersaults.

During the last administration of Goodluck Jonathan, certain steel makers were given import waivers to bring in cold rolled mills on the understanding that they produce and then sell these coils directly to manufacturers in the downstream subsector, who then use them for further production of other metal products.

As abused as the policy was perceived to be, manufacturers expected a more tactical approach as investors had already pumped in billions following the backing of the previous government. But the Muhammadu Buhari administration reversed the policy, jeopardising some investments, steel makers say.

Kamoru Ibitoye Yusuf, CEO of Kam Industries, which operates a large cold roll mill in Ilorin, Kwara State, says the country needs a consistent policy on duty rates so as to attract more investments to the cold rolling mills in Nigeria.

“Iron rods have been protected by 50 percent duty, but cold rolled coils have 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 adds.

Frank Udemba Jacobs, president of Manufacturers Association of Nigeria (MAN), laments that policy inconsistency in the manufacturing sector in general and steel sub-sector in particular is hurting investments.

Another challenge facing the steel sector is low patronage. Steel manufacturers further complain that government agencies and departments owe them huge sums of money when they make supplies.

More so, cheap Chinese steel, mostly substandard, is dominating the Nigerian market.

Experts worry that these steel products are not only bad for construction but can also cause cracks and holes in infrastructure.

 

Ajaokuta Steel impact

Despite gulping almost $10 billion of public funds, the Ajaokuta Steel Complex has not produced a single sheet of steel, according to experts.

In a move that shocked economists and finance experts, the federal government budgeted N3.9 billion in 2016 and N4.27 billion in 2017 for the resuscitation of the moribund Ajaokuta Steel Company, despite an earlier business case in the last administration showing that the complex could only work if properly privatised. Government is still pumping money into the ‘behemoth’.

Lack of privatisation of Ajaokuta Steel is dragging the manufacturing sector back, Jacobs says.

 

According to him, 80 to 85 percent of manufacturing equipment and spare parts should have been coming from Ajaokuta Steel had it been working. This was one of the original reasons for setting up the complex.

Experts say that steel is the backbone of every economy because the majority of  things on earth are made with tools or machinery. Also, steel is used in building bridges, roads, houses, trains, trucks and ships as well as in mining and oil drilling.

It is interesting to note that Ajaokuta and Delta Steel were incorporated the same year—1979, but the latter has now dwarfed it.

Official data show that the country imports steel valued at $3.3 billion every year.  An average of steel products such as standard plates, hot-rolled coil, cold-rolled coil and rebar is estimated at $464.7 using Chinese prices, which means that Nigeria imports roughly 7.1 million metric tonnes of steel annually.

Eighteen of the 30 functional steel firms in Nigeria produce about 2.2 million tonnes a year, with scraps and billets imported mainly from China.

The steel sector is driven by the private sector, which is filling the gap left by Ajaokuta Steel Complex, a ‘behemoth’ expected to have added at least one million tonnes to the national production.

 

Way Out

Raj Gupta, chairman of African Industries, with 12 manufacturing plants across Nigeria, six of which are steel companies, believes that Nigeria should checkmate cheap Chinese steel. Gupta says that actions have been taken across the world to check cheap Chinese steel products, urging Nigeria to toe the same line.

Aliko Dangote, president of Dangote Group, believes that the manufacturing sector requires a consistent policy to thrive and compete effectively

Oluyinka Kufile, chairman of Basic Metal, Iron and Steel and Fabricated Metal Products Group of the Manufacturers Association of Nigeria, says the local steel sector needs government patronage.

In his last words, Ibeabuchi, earlier cited, says, “Privatise Ajaokuta Steel immediately. This is long overdue.”

 

ODINAKA ANUDU