Tembo Steels: Setting the Standard with In-Country Manufacturing Across All Steel Verticals
World Business Journal talks to Sanjay Awasthi, Chairman of Tembo Steels, about recent innovations, expansion plans, and the journey of manufacturing authentic ‘Made in Uganda’ products from iron ore to steel.
What are the most recent expansions undertaken?
In 2023, we introduced Thermax-powered (TMX) steel TMT, a state-of-the-art product incorporating German technology, produced through a carbon-neutral process. This innovation significantly enhances steel properties, optimising the strength-to-weight ratio and effectively reducing steel consumption. This year, we plan to commission our second direct reduced iron (DRI) plant with a 250,000-ton capacity, which sources raw material from Kabale. Our pioneering production of 4.5mm wire rods, the first of its kind on the continent, enhances our product portfolio. Manufacturing wire rods directly from liquid steel through primary steelmaking exemplifies our commitment to 100% made-in-Uganda products, setting new industry standards, and establishing a global precedent through real-time advancements in Uganda.
What advantages does direct reduced iron offer?
DRI offers an environmentally sustainable steel production technology that has been proven to reduce CO2 emissions by up to 70%. Compared to traditional blast furnaces emitting 2.2 tons of CO2 for every ton of steel produced, DRI scrap routes are becoming the new norm globally, particularly in the West. The shift to greener steel making through DRI is evident in Europe and China, with the dismantling of approximately 100 million tons of blast furnaces and Tata Steel’s recent closure of blast furnaces in the UK. Greener steel production will increasingly depend on the DRI scrap route, surpassing outdated and emission-heavy blast furnace technology for primary steelmaking.
What is the current production capacity of Tembo Steels?
As the sole company on the continent covering all four steel verticals (wire rod, rebar, HRC, and structural steel), we meticulously oversee the entire production cycle, ensuring a 100% self-sufficient process and complete in-country manufacturing. Our production capacity reaches nearly 1.8 million tons of primary/secondary steel products.
However, realising our full potential encounters challenges, mainly stemming from policy constraints that warrant amendment. The influx of cheap imports significantly hampers our production capabilities. Over 70% of the total steel production cost is attributed to raw materials, with an additional 20% allocated to electricity, constituting 90% of overall expenses. Despite being the largest electricity consumer in the country, the elevated electricity cost remains a considerable obstacle. We operate at 10% to 15% of our total capacity, primarily due to these two main obstacles.
How has the implementation of the BUBU policy influenced your business operations?
While the commendable Buy Uganda, Build Uganda (BUBU) policy is in place, there’s a potential misconception. Adopting the BUBU narrative without examining the percentage of Ugandan components in a product falls short. Some entities import significant portions of steel, adding minimal value. In contrast, we achieve complete import substitution, following an integrated process from iron ore to the production of various steel products. A more precise BUBU framework is essential, reserving the BUBU logo for products entirely made in Uganda. For items with lower percentages of local content, a distinct set of incentives, possibly through a gradual scheme, would encourage increased contribution to the local economy. For example, if a product has only 10% or 20% Ugandan content, it becomes crucial to differentiate it from products with 100% local origin, aligning incentives with the proportion genuinely made in Uganda.
