Business News of Tuesday, 24 May 2016
Local steel manufacturing companies say they will have no choice but to shut down due to cheap imports and killer electricity tariffs.
Local steel factories employ nearly 9,000 workers, comprising 3,000 workforce in the mills and 6,000 indirect workers, representing scrap collectors and dealers, transporters, etc.
If the steel companies which recycle locally available scrap metals into iron rods shut down, the country will be importing not less than $125m worth of steel products annually, with its attendant consequences on the stability of the cedi.
Local steel companies have an installed capacity of 450,000 tonnes per year, which is more than the local demand of 300,000 tonnes per annum; therefore the decision to allow imports raises questions about the country’s commitment to industrialisation, which is key to economic growth.
In a position paper to the government, the Steel Manufacturers Association of Ghana (SMAG) called for the imposition of 25% special levy on imported finished steel products, in addition to 20% import duty, to protect the local industry, as well as concessional power tariff, which at the moment constitutes 34% of their cost of production.
According to them, the proposal to impose 25% special levy on steel imports, in addition to 20% import duty, is in line with a similar strategy adopted by Nigeria to save their dying steel industry.
The association said the imposition of a higher tariff will protect workers in the steel industry, which falls in line with the Trade Ministry’s import substitution strategy to foster growth of the steel industry.
The steel manufacturers said available data indicates that with the imposition of new electricity tariffs, the steel manufacturers would not make profit.
“With the current electricity tariff of 71.65 pesewas per kilowatt hour, and additional demand charges of GH?50.960 per KVA, the cost of production will be GH?2,486 per tonne.
“Steel mills are unable to compete with the imports of finished iron rods, which are currently at a price of GH?1,600 per tonne, inclusive of customs duty of 20%, and other clearing expenses,” they argued.
The association noted that studies have shown that it would be impossible for steel mills to remain in business under present regime of cheap imports, high electricity tariffs, rising cost of raw materials, labour, operational expenses and financing cost, among others.
“The steel industry worldwide is experiencing downturn, making the imported finished products very cheap.
“Prices of inputs such as electricity and scrap are increasing, making mills to produce below capacity and therefore at high cost,” they said.
It is the view of manufacturers that the development of the steel sector would not only ensure employment for the teeming unemployed youth but would also be the solution to the nation’s huge demand for iron/steel materials needed for construction and development purposes while contributing greatly to the Gross Domestic Products (GDP) of the economy and reduce the huge sums of foreign currency spent on imports.
They believe the steel industry can survive provided there is the will, commitment and genuine patriotism.
“Though this has been stagnant for so long, it could be reactivated for industrial transformation and growth.
“The structures on which the steel industry rests are in a state of collapse and if remedial measures are not taken immediately, it would lead to total collapse of the steel sector in Ghana,” the association added.