Steel industry collapsing

The draft of the law to ban the exportation of ferrous scrap metals cannot be found at the Ministry of Trade, even though the Attorney-General’s office has passed it on to the sector ministry, according to highly placed sources at that ministry and the law office.

The sources, who pleaded anonymity, confirmed that the draft had gone through final corrections at both offices and was awaiting Parliamentary approval. The exportation of ferrous scrap metals is currently under administrative ban to protect the local steel industry which is suffering competition from illegal exporters. Ghana in 2010 lost an amount of GH¢60,512,100 through the illegal exportation of 110,022 metric tonnes of ferrous scraps, despite a ban placed on it by the Ministry of Trade and Industry in 2004.

The shipping lines in the country succeeded in exporting 5,001 containers of the scrap in 2010 alone, through the port to the detriment of the local steel companies. It has come to light that the local steel companies are currently producing under capacity, due to the inadequacy of raw materials, which is a result of the increase in the illegal exportation of ferrous scrap metals.

The action by the illegal exporters is also threatening local labour of over 3,000 workers from the five steel companies, namely Tema Steel Company, Ferro Fabrik, Western Steel, Special Steel and Sentuo Limited.

The Deputy Commissioner of the Customs Division of the Ghana Revenue Authority (GRA), Mr. Samuel Akwasi Yankyera, in March of this year, signed a directive to commanders of all ports and stations to supervise the loading of containers with scrap metals before such containers are exported.

The Chronicle investigations revealed that dealers in scrap metals have had a long standing relation with the local steel companies, which were operating their raw material market without competition, and decide the going price without recourse to other stakeholders.

The monopoly enjoyed by the local manufacturers was short-lived when the export market surfaced, and from Asia, businessmen rush to the West African coast scavenging for ferrous scraps to feed the steel industries in their respective home countries.

With the enthusiasm injected into the system, courtesy the competition, and in order to save the local steel industry from extinction, the government, about eight years ago, slapped an administrative ban on the export of ferrous scraps.

The business went underground, and the competition remained keen, with the exporters controlling the market price, while the local steel industries groped in the dark.

At a stage, the local steel industry was operating at less than half its capacity, resulting in intermittent shutdowns of plants.

There were attempts by the local steel companies to push their fight to higher ground, but the furtherest they went, was to knock on the doors of the Trade Ministry to intervene, and so from time to time, the sector, when under pressure from the media, seems to be heard barking, but that never lasts.

In the heat of the booming business of scrap metal exportation in 2011, the media and Customs, in a joint exercise, intercepted 24 containers loaded with scrap metals ready for export, and were subsequently impounded. The question is what happened to these containers stuffed with ferrous scraps.

This year, 31 containers loaded with scrap metals were impounded by Customs officials at the Tema Heavy Industry Area, and this looked like serving as a deterrent to would-be exporters, because they have finally been seized and would soon be auctioned to the public.

The danger is that the containers are loaded at the scrap yards, sealed, and sent to the terminals of the shipping companies with no supervision, at least two days to the arrival of a vessel.

Exporters only provide a bill of lading to Customs which shows ownership of a cargo, and not a declaration of the content. In fact, the DECLARATION is to convince Customs to release the items, based on which the shipping line prepares a BILL OF LADING to the exporter for onward shipment.

What the investigations established was that because the state had banned the exportation of ferrous scraps, the right contents are not described.

In an attempt to compete with the “Asian Tiger” of an Indian exporter, the local steel companies are paying the same price or more for ferrous scrap metals as the exporter, which the local manufacturer cannot stand, looking at the overhead charges of electricity.

As though the local steel industry is cursed to suffer, there is the case of some companies which are importing finished products of iron rods, but describe them as raw material, and as such attract lesser duty at the port.

Some of these come in the form of coils as raw material for nails, but end up being stretched with machines and cut as finished products of iron rods.

Over the past four weeks, Tema Steel Company, the nation’s premier steel entity, has shut down its furnace unit, primarily because it is not able to stand the competitive heat emanating from the open market.

Our sources have hinted that the decision to shutdown is two-way-pronged, and the first has to do with alleged infiltration of the local steel market by persons who, though have manufacturing plants, undertake the importation of finished products which they declare at the Tema Port as raw material and a lower rate of duty paid.

The product enters the market and is sold cheap, hence the finished product from Tema Steel, which has gone through high tariff overhead electricity costs, is left running at a loss. Another side of the excuse for the temporary shutdown is that the quality of products from the company has been challenged by contractors who dictate the market value of such products.

As we investigate, several tonnes of iron rods are packed in the yard of the company and cannot be sold immediately, partly because the specifications are not patronised by the local market.

Our information is that the “5/8 and ½” inches iron rods, which are used for pillars and concrete slabs, are the much sought for specifications in the local construction business, but a number of steel companies in the country cannot produce them, except Special Steel, which is now 100 per cent Ghanaian owned.