Addressing low capacity utilisation with steel exports
When mills are underused, they use raw materials less efficiently and producers are forced to reduce prices in the scramble to win orders and cover their high fixed operating costs. To avoid a situation where sub-standard steel rods dominate the market, a concern the Standards Organisation of Nigeria (SON) has raised, many operators are beginning to explore the regional market for exports. FEMI ADEKOYA writes.
A steep rise in exports, especially from China, contributed to acollapse in the price of steel two years ago. That hit earnings hard at companies globally with Nigeria not left out, triggering major job losses and raising questions about the industry’s future in some developed countries.
While demand for steel will remain high in developing countries like Nigeria, exploiting the export market remains a viable alternative when the industry is hit with glut amidst reducing consumer purchasing power.
Considering foul plays by some operators who are beginning to cut corners in the production of steel rods, the Standards Organisation of Nigeria (SON) recently issued a warning to local manufacturers, even as it shut four of such factories found culpable.
Despite these challenges, African Industries decided to consolidate its operations in the regional markets, as it unveiled plans to export its steel and iron bars to neighbouring West African and North African countries.
The plan, according to the company, is also in a bid to improve its foreign exchange earnings, promote import substitution and save the nation $650 million spent on importation.
Speaking at a business luncheon organised by the firm in Lagos, recently, the Group Managing Director of the company, Alok Gupta, explained that the firm decided to explore the export market having satisfied the domestic market demand for construction steel and iron bars.
Gupta added that by making inroads into countries like Ghana, Senegal, Ivory Coast, and Morocco among others, the company is saving the country huge foreign exchange hitherto spent on the importation of steel into the country.
“We have been exporting non-steel products to regional markets for many years. However, our steel products had to compete with big produces from Ukraine, Russia, China and other developed countries.
However, our constant effort in marketing backed by international certification and satisfied products sampling by user made it acceptable in these market.
“Recent adjustment of naira has made our product more competitive to the extent that a significant amount of our production is in now destined for export. We are targeting to export between 150,000 – 200,000 metric tons of steel on annual basis to start with. Our export of steel during first nine months of this year has increased over three folds by weight and value compared to last year.
“However, there are many miles to go and it is just the beginning. There are many challenges both on logistics and fiscal policy issues.
Sea freight between Lagos and other West African countries is almost double of what it costs to bring the steel product from Ukraine or China”, he added.
Besides, to deepen local sourcing and investments in the steel sector, the Minister of Mines and Steel Development, Dr Kayode Fayemi, has charged operators to invest in the sector’s upstream by mining rather than depending on scraps alone for production.
Fayemi who was represented by the Director, Steel and Non- Ferrous Metals, Ime Ekrikpo, assured operators in the sector of right policy support and incentives aimed at taking the industry higher.
“Our key target in the mining industry is the steel and we will give them all the necessary support to begin to produce iron ore,” he said.
Also Speaking, President, Manufacturers Association of Nigeria, Dr. Frank Jacob, applauded the company’s export feat, saying, “In spite of harsh operating environment, they are able to produce, export and earning forex for the country. I congratulate them”.
Group Executive Director, African Industries Group, Uche Iwuamadi, noted that the company has invested over $1.1bn in Nigeria as total investment of the group and plans to invest more in upcoming projects, adding that exporting steel saves the nation over $650mn yearly.
“In the past, many people have been importing steel into this country; nobody talks about that because imported steel cannot compete with our own. We are in the same standard so you don’t need to waste your money importing steel”, he added.
Chairman Basic Metals, Manufacturers Association of Nigeria, Chief Oluyinka Kufile, said: “On behalf of Basic Metals Sector of MAN, I congratulate you and thank you for contributing to the Nigerian economy. We want to see more because our sector is the backbone of Nigerian economy. If you talk of anything, no matter the project you do, no matter the industry you do, steel takes nothing less than 70-75 percent whichever, whether it is fertilizer, refinery, etc, steel takes 70-75%”.
Comptroller-General of the Nigeria Customs Service, Hameed Ali, who was represented by the Area Controller, TINCAN, Bashir Yusuf, said: “MAN and SON should put heads together to see how best they can approach the government to see how they can help manufacturers to improve on their products so that we can export more and more as African Industries are doing. Very soon, the ship to Morocco would sail out but there’s something that touches the heart and I urged the MAN President, I will always be calling on him to look at how best we can improve on our freights. Shipping from Ukraine to Ghana is $40 per ton, but from Nigeria to Ghana is $65 per ton. I assure you whatever it would take to assist and facilitate exports of made in Nigeria goods, we would do it; whatever it takes”.
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