Glut hits Nigeria’s steel market
* Capacity utilisation drops, China may flood market with cheaper imports
* SON mulls stricter sanctions for local producers over non-conformity to NIS
As the glut in global steel production heightened, with many steel industrial firms shutting down, local steel manufacturers may have begun to feel the pangs of the glut as capacity utilisation drops below 50 per cent sequel to low demand.
Coordinator, Steel Manufacturers Association of Nigeria, Prince Felix Oba Okogie, said the Nigerian steel industry is in comatose, pointing out that the industry is faced with a very bad market with no demand for locally-made steel products.
“We are producing but not selling. Even during production, we do not have enough power and the cost of things are getting higher particularly gas and electricity. We are producing but we are not selling because there is no demand,” he said.
Worried that manufacturers may be cutting corners in their production in order to reduce their liabilities and improve sales in a saturated market, the Standards Organisation of Nigeria (SON) has unveiled plans to impose stricter sanctions on erring steel and iron producers which fail to meet the minimum requirement of the Nigerian Industrial Standards (NIS).
To address overcapacity problem in its aluminum, chemical, cement, and steel industries, China has resolved to flood the global market with cheaper exports even as struggling competitors protest.
Indeed, steel mills in the Chinese industrial hub of Hebei have been trimming prices of rebar mesh-wires used for building by between $5 and $10 to $295, citing the devaluation as a fresh chance to offload excess stocks of steel.
While Nigerian steel manufacturers increased their production capacity following government’s policy increasing tariff on imported steel products, many of the unneeded mills, smelters, and plants in China were built or expanded after the country’s policy makers unleashed cheap credit during the global financial crisis in 2009.
Okogie added: “If we are producing at full capacity, the steel industry will employ over 300,000 people, but we currently employ about 40,000 which is a far cry compared to what the industry can employ. If the industry does not improve I am afraid to say it would lead to an enormous job loss in the steel sector,” he said.
Acting Director-General, SON, Dr. Paul Angya, who read the riot act to manufacturers after an assessment tour to evaluate the level of compliance of steel products in the country to the NIS, said the agency discovered that steel producers have begun to cut corners in for production thereby falling short of the minimum requirements of the standards.
Angya maintained that the steel producers have the options to shape up or shape out.
“We are here today to meet with the steel manufacturing group to inform them about the new vision of government and also to let them know the problems we have found in our survey of products in the market and also read the riot act to them in order for them to shape up in view of the critical nature of their products not only to protect the lives of Nigerians, but also for the economy.
“We are going to be taking stricter measures on non-conformity. I will make the inspectorate and compliance directorate to aggressively carry out their operations. So this is to tell you not to put your legs in the wrong place. We have a very limited time to prove this point. Starting from today, we have reconstituted our task force to go out to ensure conformity of standards to our requirements.”
He noted the group formed by the SON in 2011 to address the challenges faced by steel manufacturers in the country saw some level of improvement in the level of quality of steel bars, but stated that due to the economic downturn, most steel manufacturers have begun to drift by doing business the wrong way.
“Recently in the last one year, we have discovered that they have started to drift back to old practices of not conforming to standards. We are beginning to see steel products that do not meet our requirements. Because of the downturn of the economy, they have been trying to cut corners to remain in business.
“In view of the new drive and vigour of the federal government, we have decided to infuse that vigour in the steel manufacturers to energise them to push them to do the right thing. We have a new law that gives SON power to deal with this kind of situation. We are using this medium to tell them to shape up or be dealt with severely. We are also going to be encouraging our government contractors to buy products that are made-in-Nigeria so that our money can be ploughed back into the country,” he said.
Okogie said SON has played a major role to try to reduce the challenges faced by the industry by enjoining steel manufacturers to work with the standards, calling on the government to patronise locally made goods to increase productivity and boost employment opportunities in the country.
A representative of Landcraft, Prakash Gupta, said boosting the steel sector is the right step in the right direction, which will also create a lot of employment opportunities, saying that the government must protect local production.
“Currently, we are manufacturing more than the demand because the local content is not protecting us. What is being imported is the same as what is being produced locally. We as a group promise to adhere to SON standards and extend our full cooperation to SON. The industry has been going through a tough time due to lack of demand. This is affecting the real sector of the economy and this is why the growth is moving slowly. We want government patronage and we also want some local content law to be passed,” he said.
Presently, China produces more than double the steel of Japan, India, the U.S., and Russia—the four next-largest producers—combined, according to the European Union Chamber of Commerce.