Focusing on the determination of the federal government to diversify to a knowledge-based economy, the Raw Materials Research and Development Council (RMRDC) is promoting synergy amongst stakeholders towards achieving a sustainable economy via the steel industry. BINTA SHAMA reports.
Steel is a high strength, formable, versatile and low cost material used globally for a variety of purposes. It is used in the production of automobiles, building and infrastructure construction, domestic appliances, fabrication of metal products, agriculture and military equipment, construction of energy, rails and roads facilities. It is an incombustible material with resistance to termites, mold and mildew. It is also environment friendly when the scraps are properly managed.
Global steel production
Globally, steel is recognized as an ingredient for actualisation of sustainable industrial and economic development aspiration of nation’s economies. The negative aspect of economic of dependence on importation of steel raw materials and finished products by any nation cannot be overemphasized. This has made countries endowed with raw materials for the production of steel to facilitate and promote the development of the Iron and steel sectors. This has led to significant increase in Iron and Steel production globally. Global steel production grew significantly from 28 million Metric tonnes (Mt) at the beginning of the 20th century to 781 million Mt at the end of the century. Over the course of the 20th century, production of crude steel rose significantly to 1.6 billion Mt per year. Also, during this period, the consumption of steel increased at an average annual rate of 3.3% of global steel output.
According to World Steel Association, as at February this year alone, the global steel production has reached 142.7 million Mt. While at individual countries level, China produced the highest volume of steel estimated at 996.3 million Mt in 2019. India, with an output of 111.2 million Mt the same year. Japan, the third-largest producer, produced 99.3 million Mt in while the United States, the fourth-largest producer, had an output of 87.9 Mt of steel, amongst others. With the opening up of global trade after the COVID-19 disruptions, Africa, as at February 2022, produced 1.3 million Mt, mostly by Egypt, South Africa and Libya. Nigeria left out.
Production of steel in Nigeria
Nigeria is blessed with all the major raw materials needed for the production of iron and steel. These include 3 billion Mt of iron ore, 3 billion Mt of coal, more than 700 million Mt of limestone and 187 billion SCF of natural gas. The planning for the Nigerian steel sector started in 1958. However, after about 50 years, the country is yet to establish a stable iron and steel sector despite the huge investment of over $ 7 billion already expended on steel development. The exploration started at the Itakpe iron ore deposits in 1963. Between 1961 and 1965, several foreign companies who came to assess the Nigerian steel sector reported that steel production was not feasible as a result of lack of domestic market, high cost of the technology, infrastructural development, lack of manpower, the poor grade of iron ore deposits in Nigeria and other international political considerations.
However, in 1967, Russian experts came to Nigeria to conduct feasibility studies toward the establishment of iron and steel plant in Nigeria. During the period 1960 – 1970, the federal government directly coordinated the iron and steel sector in Nigeria and there are instances of policy inconsistency. During the Second National Development Plan (1970 – 1974), the government established the National Steel Development Authority (NSDA) that was saddled with the responsibilities of iron and steel development in Nigeria. Under the coordination of the Russian experts, NSDA conducted various geological surveys that led to the discovery of commercial quantities of iron ore in Nigeria and during the implementation of the third National Development plan (1975 – 1980), the government signed various agreements for the construction of two integrated steel plants and three rolling mills. In 1979, the government promulgated Decree No. 60 of 18th September 1979, which unbundled NSDA and established the Ajaokuta Steel Company, Delta Steel Company, Jos Steel Rolling Company, Kastina Steel Rolling Company, Oshogbo Steel Rolling Company, National Iron Ore Mining Company, National Steel Raw Materials Exploration Agency, National Metallurgical Development Center, and the Metallurgical Training Institute. While the three rolling mills and DSC was completed on schedule, the ASC was not completed after over 40 years of intermittent construction work. Up till today, the Ajaokuta Steel Company (ASC) has failed to take off while Delta Steel Company (DSC) and the rolling mills in Oshogbo, Jos and Kastina are producing at very low capacity utilization.
Value addition
These developments have led to fluctuations in the production value addition and capacity utilization in the Base Metal, Iron and Steel Sector of the economy. According to the statistics available from the Annual Reports of the Manufacturers Association of Nigeria from 2016 to 2020, the Production Manufacturing Value (PMV) in the base metal, iron and steel and fabricate metal products sectoral group was 240.623 billion naira in 2016, 408.347 billion naira in 2017 and 503.9 billion naira in 2018. The corresponding values for 2019 and 2020 were 483.424 billion and 324.480 billion naira respectively. The corresponding values for local sourcing of raw materials were 59.7% for 2016, 68.77% for 2017, 60% for 2018, 59.15% for 2019 and 65.5% for 2020. One major observation that may have led to increasing local sourcing is that firms look inwards for raw materials in periods of foreign exchange difficulty. In addition, the land border closure, has increasing impact on utilization of local raw materials. However, the increase in capacity utilization from 59.15% in 2019 to 65.6% in 2020 may be attributed to the opening up of world economies for trade after months of lockdown. A number of studies indicated that the Nigerian Steel Sector is being sustained through the recycling of scrap steel obtained mostly from municipal solid wastes. In many rolling mills, 100% scrap steel is recycled for the production of iron bars used for civil construction. Scrap steel recycling results in generation of <7% and 7-15% slag for iron and high carbon respectively.
Overdependence on imported billets
The sector is also highly dependent on imported billets. However, as result of the high cost of billet importation, many steel companies are unable to function. Nigeria imported $1.18 billion worth of steel materials in 2020 according to the United Nations COMTRADE database on international trade. From the statistics available from National Bureau of Statistics, Nigeria imported Iron, Steel and Metals, valued at N837.76 billion in the 3rd and 4th of 2021. According to the statistics, the country imported basic metals, iron and steel products with 600mm in width, rolled, painted and coated, varnished and coated with plastics within the 6 months period. The total value of basic metals imported within the two quarters was N748.529 billion while that of Iron and Steel was N88.232 billion.
Challenges in the sector
Evidently, the Nigerian steel sector faced a lot of operational challenges. The privatization that was carried out in 2004 – 2005 failed to revive the sector. The two integrated iron and steel companies are unable to produce billets for the 20 steel rolling mills which include private sector establishments in the country. Following the privatization exercise, the DSC started operations in December 2005 after about 10 years of inactivity. Although, during the third national development plan (1975 – 1980), thousands of Nigerians were trained in country, and in India, Russia, Germany, UK, Japan, etc. Unfortunately, when the public steel sectors collapsed, the staff was left in limbo for a long time, which resulted in the accumulation of huge pension liabilities.
These huge pension liabilities made the steel companies to attract fewer premiums during the privatization exercise. Likewise, the location of most of the steel projects made their operations costly. Iron was being mined at NIOMCO, Itakpe in the North central part of Nigeria. It was being sent to DSC down south for the production of billets, a distance of 327km by rail. Billets produced from DSC was sent to the three inland rolling mills, one in south western Nigeria (Oshogbo), another in North central (Jos) and the third in North West (Kastina), all these locations are far from Aladja from where the billets were produced. Another challenge is that of funding/operational cost. After the successful construction of DSC, NIOMCO folded up, DSC followed and because of lack of billets, the other three government owned rolling plants also folded up.
