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How Delta Steel got new lease of life from private capital

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It is a new era for the Aladja-based Delta Steel Company as the once moribund complex is now rolling steel into iron rods, thanks to private capital from Premium Steel and Mines Limited, an Indian company that says it is pumping N600 billion to make the humongous firm work again.

BusinessDay’s on-site investigation shows that the now Premium Steel and Mines Limited, sitting on 172 hectares of land, is targeting 1 million metric tonnes (MT) of liquid steel, 950,000 MT of billets and over 300,000 MT of rolled products when all the segments in the complex kick-start again.  This was the capacity of the plant in 1980s and the firm is planning to reinstate it, insiders told BusinessDay.

The integrated complex is a story of how political will and the right investor can transform moribund state owned enterprises/ factories into viable enterprises. It is a model that needs to extend to once publicly-owned but now moribund and badly managed facilities such as Ajaokuta Steel Complex, Aluminium Smelter Company, Nigeria Paper Mill, Nigerian National Paper Manufacturing Company, Federal Superphosphate Fertilizer Company and National Steel Raw Materials Exploration Agency, among many others.

BusinessDay found that right now, only the rolling mill section is in operation at Premium Steel, but the segment employs roughly 160 workers. Other sections such as pelletising and beneficiating plants, direct reduction plant (made up of two modules), steel melting shop, continuous casting shop, air separation plant, the foundry, and general maintenance  are not yet in operation as of Friday, July 23.  Insiders told BusinessDay that the company has only invested a fraction of N600 billion and is expecting foreign capital to revive these sections.

The company is also looking at producing automobile spare parts in the future, BusinessDay was told. This may not be far from the truth given that it was Delta Steel Company that supplied spare parts to Peugeot Automobile in Kaduna in the 1980s and 1990s.

However, it was found that the company is confronted with the realities of Nigeria’s market, populated by cheap Chinese steel.

Currently, it has reduced the manganese content of its iron rods to 50 to 72 percent as against up to 90 percent in the 1990s. The reason given by someone familiar with the situation is that the price of manganese, which determines the strength of iron rods, is very high and it is nearly impossible to survive with the 1990s standards in today’s market. This situation is also affecting aluminium makers who now consistently reduce the millimetres of roofing sheets to compete favourably with smuggled and cheap Chinese products.

“You can imagine how many jobs this steel mill will create if all these sections begin to work again,” a senior staff member of Premium Steel and Mines told BusinessDay.

Premium Steel criss-crosses two towns in Udu Local Government of Delta State—Ovwian and Aladja.

BusinessDay interestingly found that many villagers are not happy with Premium Steel. One reason is that they believe that the sale of the complex to Premium Steel was faulty, claiming that while the company bought the defunct Delta Steel at N28 billion from the Asset Management Corporation of Nigeria (AMCON) in 2014, China Polaris bid N33 billion and should have won the bid. However, Mustapha Chike-Obi, former chief executive of AMCON, had earlier debunked this allegation, saying that Premium Steel was the highest bidder.

“We are also not happy that AMCON did not give us our 10 percent shares before selling it to Premium Steel,” one villager told BusinessDay.

“Initially, villagers had 10 percent share in the company and the staff had 10 percent. Even the failed Global Infrastructure (former investor) stuck to this arrangement, but it is not the case now,” a villager familiar with the sale told this newspaper.

A staff member also pointed out that Premium Steel employed people from different parts of Nigeria and India, but did not consider the people in whose towns the complex is located.

The former Delta Steel Complex was set up in 1982 and produced steel and supplied raw materials to rolling mills at Jos, Katsina, Ajaokuta and others.

But poor management and corruption dealt a big blow to the company, resulting in low capacity utilisation and losses.

The company shut down in 1995, owing banks and backlog of salaries to workers amounting to over N10 billion, many of whom died without getting the reward for their hard work.

It was later sold to Global Steel Holdings, currently managing Itakpe Iron Ore, for $30 million after a bidding process.

The company was severally accused by villagers of asset stripping and bad management. The company was said to have borrowed over N25 billion from various banks.

“Global just went ahead borrowing money from banks and stripping the assets of the company, which was quite unfortunate,” someone familiar with the sale of the company said.

In 2008, late President Musa Yar’Adua revoked the sale of the assets to Global Infrastructure.

After the establishment of AMCON in 2010, the bad bank took over the debts and repaid them. AMCON sold it to Premium Steel, after resolving issues of debts, salaries and dissent from Ovwian and Aladja people.

“The company’s 1 tonne liquid steel capacity plant is responsible for reinforcing Nigeria with steel and allied products. We are targeting at least 5,000 jobs directly and indirectly. We shall touch the lives of over 30,000 Nigerians in the first instance before we start calculating the secondary opportunities it creates,” Prasnata Mishra, managing director of Premium Steel said, at the commissioning.

“This was left in terrible state as the plant was in a total shambles and deplorable shape when Premium Steel acquired it. We therefore retooled it with state-of-the-art equipment for competitive production,” Mishra said.

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