Tuesday, June 16, 2020

Complete Reversal of Trade Brings Back Memories of a Major Shipping Crisis

Who Remembers Hundreds of Vessels Laying Offshore with Unusable Cargo?
Shipping News Feature

NIGERIA – Those amongst us who remember the Nigerian cement crisis of the mid 1970's will be doubtless surprised at the news this week that the country's main producer is now beginning exports of a by-product, cement clinker, to overseas clients. A story which saw the fall of a government, the collapse of several buildings and the alleged deliberate sinking of a number of ships is worthy of a retelling.

Oil is at the heart of this story, at the time the country’s ports were capable of handling the limited quantities of imports and exports passing through, despite the lack of decent, reliable machinery. The turnaround of vessels however was lamentably slow and ships could sit for weeks, if not months awaiting service, often with prohibitively high detention fees being levied on the owners. The discovery of oil changed everything, as it so often does, and not immediately for the better.

Development of infrastructure roared ahead, although the country had the capacity to produce cement the industry was hardly prepared for what was needed, imports of consumer goods rose to previously unheard of levels and the nation required an immediate revision of its building programme. To feed this, huge quantities of cement were ordered after the government stepped in to place the orders, rarely a good sign that things will be on time and in budget.

So how much did they order? Well over 20 million tonnes as memory serves, with orders for immediate delivery which a plethora of overseas firms and the ubiquitous middle men could supply against the Nigerian bank letters of credit. Surely nothing could go wrong? The answer being of course just about simply everything that could, subsequently did.

Ports that weren’t managing at all now saw hundreds of cement laden ships lying offshore for months (indeed sometimes years). Now cement is rarely thought of as perishable, but even in moderate conditions it has a ‘use by’ date. Stick it in the hold of a freighter, in the offshore humidity of the West African coast and it gets damp. And then it hardens. Pretty soon you don’t have a ship carrying cement, you have a vessel built of the stuff. To remove it is a nightmare, some of those ships seemingly ‘disappeared’, some saw crews chipping away in the blocked holds trying to remove the stuff.

Even the cement which did get unloaded was in a poor state, it found its way into the supply chain and later, when buildings started to collapse, many looked quizzically at the quality of what was used in the basic construction. Still no worries, those letters of credit would see all was well, until that was the banks, apparently with the blessing of the government, reneged on the deals.

Insurers, wary of a variety of claims, found excuses not to settle, the country fell into a period of political upheaval as Olusegun Obasanjo gave way to the Shagari government, corruption blossomed as oil revenues serviced the burgeoning international debt.

The fact that this month Dangote Cement, the country’s biggest producer, exported 27,800 tonnes of cement clinker, a by-product used as an additive to building mortars, to Senegal demonstrates the turn round the country has undergone since those troubled days. The company, its boss, the richest man in Africa and undoubtedly troubled by the financial losses to his various businesses and personal wealth during the pandemic, will doubtless see this shipment not only as a milestone, but as a potentially new revenue stream.

Dangote has established an export terminal in Apapa Port, Lagos after the country’s transformation from one of the world's largest bulk importers of cement, firstly to self-sufficiency in cement production, and now to become an exporter of cement clinker to other countries. The company says it expects to increase the quantity of clinker export to other parts of Africa within the next few weeks.

Dangote Cement says it is able to take advantage of the African Continental Free Trade Area, and by so doing contribute to the improvement of intra-regional trade within the ECOWAS region. Speaking at the ship’s departure Group Executive Director of the Dangote Group, Alhaji Sada Ladan-Baki said the increased exportation of clinker and cement to other African countries would not only place Dangote Cement among top clinker exporters in the world, but would also boost Nigeria’s foreign exchange earnings and reduce unemployment in the country, saying:

“The beauty of what we have done is that we are going to be generating foreign exchange for the country in terms of dollars and Euros. For every batch of clinker we export, the money comes back to Nigeria. The amount we are talking about is not small. Presently, Dangote Cement should either be number one or number two exporter of cement in Africa and the revenue we have generated in the form of foreign exchange is running into millions.

“This terminal will assist Dangote to actualise the full potential of the company’s investment in cement. You know as usual, when the rain comes, sales decline, but not clinker export. This feat by Dangote is going to generate a lot of jobs because the Export Terminal has already created jobs for many Nigerians. As at now, the numbers of employed Nigerians at the terminal have reached 100. We are targeting about 200 to 300 workers in the Lagos Terminal alone.

"But, apart from job creation opportunities, the exportation of clinker by Dangote will position the country to participate fully in the Africa Free Trade Liberalisation Agreement when it comes into being, so that Nigeria will be protected against foreign products. It will also help the country compete effectively with every country that is in the business of exportation of clinker. At Dangote Cement, we are going about it aggressively and we are seeing it as an opportunity.

“This maiden ship is exporting 27,800 metric tonnes to Senegal and this is just a tip of the ice-berg as to what we have in [our] plan. We plan is to send clinker from Nigeria to Ivory Coast, Cameroon and Ghana. Cameroon as an example, takes about 82,000 metric tonnes every month. Our target is to export at least 4 million metric tonnes of clinker annually to various parts of Africa.

"That is our target that we hope to achieve within the next one to two years. This particular voyage is going to our sister company in Senegal. We have an integrated plant of 1.5 million tonnes and this one is expected to give the plant additional clinker that is required for the plant to sustain production. In the next week or two, we are going to be shipping 82,000 metric tonnes to Cameroon in batches of about 25,000 to 29,000 metric tonnes per voyage.”

Photo: The first major export shipment of cement loads for Senegal.