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This is Why Ajaokuta Cannot Make Steel

No Nigerian can visit Ajaokuta Steel Company ASC, see investments of more than $8b rotting in the African sun and not cry. i went there, I cried. what exactly is the problem? if I have written severally on this topic, but today let me do a comprehensive post.

Ajaokuta Steel Company is massive, she has 68km road network, 24 housing estates on the project. Some of the estates have over 1,000 homes, a seaport, a 110mw power generation plant, there are 43 separate plants in Ajaokuta alone. It is estimated that if Ajaokuta becomes operational, it will create 500,000 jobs.

There is no industrialized nation on earth that does not have a steel sector it’s that simple. A report by the Central Bank of Nigeria shows that Nigeria currently imports steel, aluminum products and associated derivatives of approximately 25 metric tonnes per annum estimated at $4.5bn, this figure will continue to rise, and the Nigerian economy continues to expand. Ajaokuta is an integrated steel company, it was designed by the Russian to be self-sufficient to get all its inputs from Nigeria and make steel. Ajaokuta strength is also its weakness, Ajaokuta can only work with all inputs available.

 

this will be a slightly technical post, but please try and follow.

 

Steel is an alloy of iron and carbon amongst other things, iron is the base metal in steel, to make steel, you need Iron Ore, Coke from Coal, Limestone as main components. these components are mixed in a blast furnace to produce liquid steel which can be long steel for rail lines or flat steel for automobile making etc

To give a simple example, look at steel as making jollof rice, iron ore is the rice, the limestone and coke are the pepper and salt the pot is the blast furnace. At a steel plane the blast furnace is ONLY turned on when the steel company is ready to make steel. Blast furnaces operate continuously and are never shut down. The raw material to be fed into the furnace is divided into several small charges that are introduced into the furnace at 10- to 15-min intervals. this means everything must be in place BEFORE the blast furnace is turned on, the iron ore, the coal, the limestone, everything, why? Because you do not switch off a blast furnace for another 10 years or however its campaign life is.

 

Nigeria has blessed with all the major raw materials needed to produce steel including iron ore in Kogi, coal and limestone in Enugu.

Nigerian iron has very low iron concentration. Agbaja has the largest iron ore deposit in Nigeria with about 2 billion tonnes but the Agbaja iron ore has a high phosphate content. Phosphate can cause brittleness in steel making it to fracture, thus Agbaga was abandoned for Itakpe. Itakpe iron ore has no issues with phosphate but has low iron content, thus to make steel with Nigeria iron ore, a process called “beneficiation” has to be done to process the Itakpe ores to raise its iron content to meet the required standard for steel production.

Coal? Most of the coal found in Nigeria is non-coking, thus, unsuitable for steel production. coal deposits in Enugu, have no impurities but are non-coking. The good news? Nigeria has abundant deposit of limestone and we have natural gas to provide power

 

So back to Ajaokuta, what really happened? why can Nigeria not make steel anytime soon? let’s link up the elements

  1. Policy Failure: The Ajaokuta contract was signed between the Nigerian government and the Soviet state-owned company, Tiajpromexport (TPE) the company was scheduled for completion in 1986. In 2012, the Federal Government launched her backward integration policy. Going forward import licenses for steel products was only granted to companies producing steel locally. TPE to ensure they could import steel parts for Ajaokuta simply went ahead and built the rolling mills in Ajaokuta before the actual steel plant was completed, they imported billet from Ukraine to accomplish this.  Thus, Ajaokuta was producing steel before the actual steel plant was started. Thus, amazingly Ajaokuta has a functional rolling mills but no operational blast furnace, Ajaokuta cannot produce steel from basic iron ore found in Nigeria in her blast furnace.…this is the definition of cart before the horse.

 

  1. NIOMCO Factor: The iron ore in Nigeria earmarked for Ajaokuta is from Itakpe, it has low iron content thus the FG built National Iron Ore Mining Company (NIOMCO) a 2.15 metric tonnes beneficiation plant designed to process the low-quality iron ore from Itakpe to iron ore suitable for Ajaokuta Steel. Simply put, if NIOMCO does not operate, Ajaokuta CANNOT operate (unless Ajaokuta uses imported iron ore.) as at today, June 17th 2018, NIOMCO is not operational

 

 

  1. Railway: 15m tonnes of iron ore cannot be moved by road, as it will destroy the roads, thus a railway was to be built from Itakpe to Ajaokuta to take iron ore from the beneficiation plan in Itakpe to the Ajaokuta. The. Itakpe to Ajaokuta by rail is just 52km, the rail line was to be delivered by March 2019, but the Minister of Transportation Rotimi Amaechi revised the delivery date to June 2018 and converted the purely commercial railway to also carry human passengers. These changes meant the cost of the project and delivery dates had to change as passenger wagons and train stations had to be built. To achieve this, 12 new passenger stations and 12 access roads had to be designed and built. The Itakpe to Ajaokuta (IA) has two stations. As at June 2018, The station IA1 – Eganyi to Itakpe, is still under design. Station AW1 – Ajaokuta (standard station) (zero per cent work done). Thus the railways are not functional

 

  1. Blast Furnace: The furnace in Ajaokuta is the heart of Ajaokuta, it is the pot where the jollof rice will be cooked, however it has never been turned on, why? because there has never been any time Ajaokuta has had raw materials available to ensure continuous day in day out production for 5 years. Why has there never been materials? Because there is no rail way to take iron ore from Itakpe to Ajaokuta. Why is there no railway from Itakpe to Ajaokuta? Because NIOMCO in Itakpe is moribund and no functional and cannot convert Nigeria iron ore to high grade ore for the furnace in Ajaokuta.

 

So, it follows that for Ajaokuta to work, we MUST have three key critical paths

 

  1. NIOMCO must be functional
  2. Itakpe to Ajaokuta Railway line must be functional
  3. Blast Furnace operational

All three are not functional, so its clear Nigeria cannot make steel in Ajaokuta. Nothing however stops a corrupt government official from importing billets and running them in the rolling mills to deceive tax payers. So, when anyone tells you Ajaokuta will soon work ask them, can a steel plant work without NIOMCO, railways and a blast furnace?

 

All is not gloom, Kayode Fayemi as Minister was able to secure an out of court about Ajaokuta, we must build on this

 

In closing, Ajaokuta is the only steel plant in the world built by the USSR, sold to Americans, then to Indians, all these teams have come and gone with their own technical style, there have even been accusations of asset stripping by the Indians.

 

So why this post? because I am a patriot, I will not sit by and watch scarce resources be wasted in a grand deceit. Probably some corrupt folks have told Mr President that Ajaokuta can produce economically viable steel if “small” dollars are spent. You can already see how the critical rail line delivery dates was moved back to ensure it is done in time for 2019 elections, yet it is still in design stage. Ajaokuta is Nigeria and probably Africa biggest failure. It has failed. Can it be made to work yes but the cost to integrate Ajaokuta with her mines and rails can be used to build new smaller modern turn key functional steel mills. The government should get out of Ajaokuta, sell the place and allows the private sector capital and expertise restructure and own it.

 

If you want to make jollof rice and there is no rice the solution is not to keep boiling water without rice but to go and get rice.

 

I so post

39 Comments

  1. I am really pleased at the way Kalu, the witer of this expository masterpiece has simply, yet technically unveiled the many challenges plaguing the Ajaokuta Steel project.

    Going by his facts-based analysis explained in simple ‘Jollof Rice’ terms, even a school child of 6 years can understand that the ASC is essentially a political disaster and a huge shame on the Nigerian nation in the league of naturally blessed countries (Did someone say, …industrialised nations?).

    Personally, I believe that even with the poor quality of iron ore that we have in certain parts of Nigeria, if the POLITICAL WILL was there to make ASC or any such projects work in Nigeria, the necessary purification or enrichment processes or processing plants will be built and made operational.
    Nothing, absolutely nothing, is impossible!

    Let us consider for a moment that, given the poor nature of our iron ore deposits and a possible government policy banning the importation of iron billets from foreign sources, if this were to be America or China, won’t these countries find a way (internally) around the iron ore low quality issues?
    In this age of Nanotechnology and synthetic engineering, what can be difficult with improving the quality of an existing natural deposit?

    Like the author of the article and several commenters have pointed out, it all boils down to the same thing: Lack of a political will to make it happen.

    On a personal note, I would like to thank you, Kalu, for this eye opening article.
    In the same vein as the ASC failure, it is common knowledge that the power sector in Nigeria is nothing to write home about.

    We shall be glad, and I am sure I speak for a lot of Nigerians, if you could kindly write a similarly narrative regarding the reasons the Nigerian electrical energy sector (NEPA as popularly known) is another failed arrow.

    Thank you and more grease to your elbow.

  2. Successful people keep a positive attitude; unsuccessful people get negative too often.
    Successful people take a chance and ask for what they want; unsuccessful people are afraid of failure.

  3. I carried some investigation works of the power plant in Ajaokuta two years back and had the opportunity to abreast myself with problems associated with the inability of the mill to function. As analysed by the writer and many comments given, their is no political will to put the mill functional. More so politicians see it a place to to raise cheap campaign progada. It is true that technology in steel production has improved over the year but Ajaokuta can undergo some modifications from the initia design and achieve the desired employment and services. A fact that is not near in sight.

    • For the The government to get out of Ajaokuta, sell the place and allows the private sector capital and expertise restructure and own it. Whe can’t the government do this restructuring and still own it

      • There is functioning power plant built around 1920s in Kentucky, US. Really don’t know why a serious govt cannot make Ajokuta work.

        If one take the current power distribution management by the DISCO’s as guide, I won’t expect much difference the private sector.
        Private companies in Nigeria are noting more than rent seekers.

  4. Nigerians can jump into wrong conclusions. Ajaokuta is a colossal waste, you know why? Steel production have metamorphosed over time. Why would someone use an IBM Mainframe of 1970 to type, instead of buying a laptop or iPad to perform the task. Remember, the size of a main frame computer can be two football fields! All over the world, steel workers are being sacked from the big players in India, China, South Africa etcetera. In fact, a steel plant in Australia even have just two workers, don’t be deceived by the assumption that it would employ 500,000 workers, because it would just increase the cost of production and the price of its end product. And even if we add steel to import restricted items, it won’t work because it would be cheaper to smuggle it into the country like rice and fabric materials. Even Oshiomole won’t save such largesse workforce!

  5. This piece is apt and educative, sincere clothed in patriotism, but my fear is if the govt of the day, even after seeing this incisive piece, will take a step back and analyze all the issues as numerator above, as they (govt) we’re already using the Aljezira report on ASC as a campaign tool to be one of the achievement of the govt.
    Am making this point, because just two days ago Mrs Onochie the Presidents S.A on social media tweeted with a glee, the reopening of ASC and expected steel production after over 40 yrs of the steel company.

    • However informative this apt & scintillating post is, there’s a breathe of scepticism suspiciously nullifying the sense theory. It is @best to toe the path of ‘truism’; as a goverment & as a nation.

  6. Thank you help in analysing the problem…we assure you that you have commented at the right time and Baba will try his possible best to address those issues.

  7. This of course is a very educative write up. But to my own opinion Ascl can only work if the original designer s of this company are made to come back and have a stake in the completion of the project because am sure they must have taken into consideration all the above mentioned setbacks at the initial stage. After all the said company was actually coming to work before it was interopted by policies of the then government

    • I don’t agree that bringing back the original designers is that important. In fact, the most apt thing in the write up is the recognition that it serves us better to abandon this failed catastrophe and rather spend the money on more efficient and new technologies to achieve the same goal. The reason the original designer are useless is because contrary to your speculation, if they had done their homework properly it would have been clear that the original ore wasn’t good for steel making, thus an alternate needed to be found which in turn would have affected the location of the plant and eliminating the need for long haul of raw materials. That’s simply what we do in mega capital engineering projects like this. We lay it all out on paper and ensure it all works before the first brick is laid.

  8. I grew up in Ajaokuta. 1989-2014.

    I can’t agree less with you. Ajaokuta is a grand deceit. I usually liken Ajaokuta steel plant to a house that stated from the roof. No foundation for it’s true existence.

  9. Can we still get it right in Nigeria when come to issue of induatralizatio?

    • Thanks you my very good friend and a course-mate, for this highly educative piece. However, a few comments from me:
      First, you’ve outlined 3 hurdles as being critical to Ajaokuta’s turn around but, if I comprehend your analysis correctly, quality of the available coal should also be listed as a hurdle to be tackled. Except you are suggesting that natural gas can substitute for coal?
      Second, I consider some of your conclusions and recommendations to be rather unrealistic, outrageous and overly pessimistic. For example, with the enormity of the problems and challenges you have enumerated, which private investors do you think will rationally want to stake their scarce resources in such an white elephant, bottomless pit of project Ajaokuta/NIOMC? You suggested an alternative investment in “turnkey, functional steel plant” but I can tell you that failure of Ajaokuta has nothing to do with the size or age of technology of the project. However, failure of Ajaolkuta is part of the failure of the Nigerian State in all ramification.
      Fir example, over the past years, we have also talked about exotic ideas like “captive” power projects, modular refineries, which all fit into your “turnkey” steel idea, but in different sectoral parlance. How far have we gone with all that?
      I want you to consider something fundamentally wrong with the Nigeria state where ideas that contribute to growth and development don’t seem to work in Nigeria . You need to stress the political and soci-economic dimension involved and how that can be tackled.
      All we need for Ajaokuta to work is a political will, supported by sincerity of purpose, transparency and adequate resources.

      • Mark why are you here making all this sense??? As if you don’t know it’s Naija again. Your analysis is spot on.

  10. Lack of Political Will, plus ineptitude, lkys free oil money is the bane of Nigeria’s industrialisation. Do the needful and reap continuous bountiful harvest even for generations ahead, No way. We have one also rotting away in Delta State. It is called Delta Steel Cimpany (DSC). This is shameful. Thanks for the free technical education.

  11. A good primer that would have been better with more facts and analysis. Here are a few points:
    1) Itakpe iron deposits are strip mined because the iron ore does not occur in shafts (vertical) . What this means is that the land will be increasingly scrapped aware to excavate ore leaving devastation behind
    2) The cost of steel produced at Ajaokuta will be one of the highest in rhe world due to raw material imports and the inherent inefficiencies of the 50yr old production plant. Only subsidies and high tariffs on importa will compel buyers domestically, none foreign
    3) The kiln at Ajaokuta was fired up and shut down after the ceremonial launch turning the refractory bricks designed with a 30yr lifespan into expensive dust. Reason? No raw materials available for making steel.
    4) The dredging of the 162km of waterways from Ajaokuta to Onitsha is yet to begin after 36yrs and this is how finished steel is intended to be evacuated to markets
    There are many other issues that validate your conclusion. This is one project that even if its issues could be addressed, definitely needs to stay shut and be asset stripped to fund modern modular steel plants such as pioneered by America’s Nucor.

  12. Very incicive post, but I beg to disagree slightly. Ajaokuta can work, if only the Govt and Private sector are serious. The fact we have oil is the bane of this steel project. Every “obstacles’ herein posted does exist. I was born and bred there. But to tell me that NIOMCO, Itakpe and the blast furnace cannot work because we have no rail structure in place is simply being parochial. The major missing ingredient here is the will to go all the way. U cannot make omellete without breaking eggs. You cannot own a steel project of that magnitude just by spending money. Nigeria needs to get serious. Steel production is the future of industrialization . Nigeria and her leasership aa qell as Nigerians have to find the will.

    • His write up was based on factual analysis of tangible factors that are barriers not sentiments. Of course it’s implied in the write up that if these things are done, no shaking. What that means is that a administration with the write set of cajones can take it up and fix it.

  13. This is the best essay i have seen on this. If only our nation value intelligence, people like Kalu should be running this country

  14. Very apt, incisive and intricately explanatory. But if I may add to what my then Professor Ibhadode hinted on this how viable and masses friendly is an industrial steel production plant in the 21st century that doesn’t incorporate Stainless steel production? Any serious plant of that scale coming up in this era should dully include Stainless steel production, thanks.

  15. The best technical write up I’ve seen on ASC.
    I hope and pray someone will read this and pass it to relevant authorities.

  16. Grand deceit;Only in Naija. But what I will propose is not handing it over 100% to the private sector.( See what they have done with our power). I would rather it be restructured; float 60% of its shares on the NSE. And with some form of government oversight in view of its strategic nature which does not compromise its business model.Contradictory? Nigeria does not answer to any typology.Am confident some structure can be worked out.

    • What has the private sector done with the power? Oya give us a similar report on that. Many of our people don’t even know what the problems are.

  17. This is an indept and sincere look at the impediments in our steel sector. I have seen folks congratulate both past and current government on little approaches made to deceive tax payers about the current state of Ajaokuta. I simply laugh knowing fully well that they were all out to score points and win elections. Nigerians really need to be informed. Sadly enough, only minute number are well informed or just being ignorant. Thanks for this wonderful piece boss.

  18. I am speechless. I thought I had info about ASC, I just realised I knew nothing. Thank you Kalu

  19. Very apt piece, arguments are clear and make sense. As a Nation, we need to change our paradigm, to boldy reverse prior bad decisions for the common good. This will take time but it is more likely to result in sustainable development than quick fixes for political gains.

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