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Project Document to Inform

the Feasibility Study for
Establishing a Comprehensive
Iron and Steel Industry in
Uganda
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TABLE CONTENTS

EXECUTIVE SUMMARY ........................................................................................................................ 3

1. INTRODUCTION............................................................................................................................... 4
3. FINANCIAL CASE FOR IRON AND STEEL INDUSTRY IN UGANDA .................................. 4
4. IRON AND STEEL INDUSTRY IN UGANDA ............................................................................... 6
4.1 Value chain analysis of Uganda’s iron and steel sector ........................................................... 7
4.1.1 Phase I: Iron ore deposits, mining ...................................................................................... 8
4.1.2 Phase II: Ironmaking ........................................................................................................ 10
4.1.3 Phase III & IV: Steelmaking & Continuous Casting ....................................................... 10
4.1.4 Phase V: Steel Rolling ....................................................................................................... 11
4.1.5 Phase VI: Market ............................................................................................................... 11
4.1.6 Challenges Hindering Sector Growth/Industrial Development ....................................... 12
5. GAPS TO BE ADDRESSED FOR ESTABLISHMENT OF THE INDUSTRY ......................... 13
References .................................................................................................................................................. 16
Appendix I: IRON AND STEEL PRODUCTION PROCESSES......................................................... 17
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EXECUTIVE SUMMARY

The iron and steel industry is the back bone of industrialisation and historically, all developed
economies have developed this industry first, in order to support the process of industrialisation
and development. Uganda’s iron ore deposits in the south western region are among the highest
quality iron ores in the world.

Uganda’s Vision 2040 states that in the first ten (10) years of its implementation, emphasis will be
put on the establishment of economic lifeline industries among which is the iron and steel industry.
Furthermore, among the identified key core projects to be started on immediately on the
commencement of the Vision period is an iron ore industry in Muko Kabale. In the first National
Development Plan (NDPI) it was planned to develop the use of iron ore to produce ingots that
would supply the steel rolling mills. This target having not been achieved in the NDPI period,
NDPII earmarked iron ore among the six (6) minerals for exploitation and value addition during
its period, 2014/15-2019/20. It is two (2) years to the completion of the NDPII period but this
target is yet to be achieved. The current trade deficit in the iron and steel sector is about USD 200
million.

Among Uganda’s challenges of developing the iron and steel industry is the absence of a reductant.
The government is looking at options of using coal or natural gas as a reductant. There is a need
to evaluate the environmental impacts of developing this industry in this time in light of the
proposed reductants and global trends in steel making and environmental pollution mitigation
measures. This study has to inform government on the right course o take in developing this sector.
The study is estimated to cost UGX 6 billion (about €1.3 million).
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1. INTRODUCTION

Though not the most expensive items, iron and steel are among the most sought after commodities
on planet earth. The use of iron and steel based products has come to be associated with the
industrialisation of economies [1]. This is due to the fact that iron possesses good mechanical
properties and has a low cost associated with its production. In addition, steel has high strength in
relation to its weight and price and is easily recyclable back to the production of new products.
The production of crude steel (a product from iron processing) was standing at 1,621 million tonnes
by the end of 2015 [2]. Two thirds of steel is produced using natural iron ore and entails an
intermediate product called “pig iron”. 98% of mined iron ore is used to make steel [2]. However,
most of the known deposits contain low-grade ores with iron contents less than 30%. The
remaining one third of steel is produced through the recycling of scrap metal and direct reduction
processes [4].
Uganda is endowed with a variety of natural resources including large deposits of iron ore in
various parts of the country mainly in the east and south western regions. Uganda’s iron ore
deposits in the south western part are among the highest quality in the world [3]. The estimated
quantity of Uganda’s iron ore deposits is about 580 million tonnes of natural iron ore. Nonetheless,
the country imports about 80% of the required iron and steel products.
Currently, Uganda’s imports of iron and steel products are worth USD 280 million and exports are
worth USD 86 million [5], which represents a trade deficit of USD 194 million. A strong integrated
iron and steel industry will not only facilitate industrial take-off in the country but also lead to
saving of forex expenditure, increase employment opportunities and form a strong basis to support
the growth of other sectors through forward-back ward linkages.
2. PLANNING FRAMEWORKS

Uganda’s Vision 2040 states that in the first ten (10) years of its implementation, emphasis will be
put on the establishment of economic lifeline industries among which is the iron and steel industry.
Furthermore, among the identified key core projects to be started on immediately on the
commencement of the Vision period is an iron ore industry in Muko Kabale.

In the first National Development Plan (NDPI) it was planned to develop the use of iron ore to
produce ingots that would supply the steel rolling mills. This target having not been achieved in
the NDPI period, NDPII earmarked iron ore among the six (6) minerals for exploitation and value
addition during its period, 2014/15-2019/20. It is two (2) years to the completion of the NDPII
period but this project is yet to take off. With industrialisation being targeted as one of the avenues
to be used to achieve Vision 2040, an established iron and steel industry is paramount.

3. FINANCIAL CASE FOR IRON AND STEEL INDUSTRY IN UGANDA

History has it that in the 1940s when the colonial government planned to construct Nalubale Power
Plant, it first set-up a cement factory in Tororo to supply the required cement for the plant
construction. Since then, Tororo Cement, has been in operation and has contributed to the growth
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of the cement industry and economic development in Uganda. Currently, Uganda has a similar
opportunity to develop the Iron and Steel industry. The country is undertaking a number of projects
that require the products whose raw materials exist locally in their natural form. However, the
factories to process these to make final useable products are not established. Among these natural
raw materials is iron ore whose products are required in the planned and on-going infrastructure
projects such as; Entebbe Expressway, New Jinja Nile Bridge, Karuma, Isimba and Bujagali dams,
Entebbe airport expansion, Kabaale airport, New Karuma bridge, Standard Gauge Railway (SGR),
Kiira motor vehicle assembly plant, oil refinery, oil pipeline, among others.

Currently, Uganda’s imports of iron and steel products are worth USD 280 million and exports are
worth USD 86 million [5], which represents a trade deficit of USD 194 million. A strong integrated
iron and steel industry will not only facilitate industrial take-off [2] in the country but also lead to
saving of forex expenditure, increase employment opportunities and form a strong basis to support
the growth of other sectors through forward-back ward linkages. The industry will also increase
local content in on-going and planned projects like the SGR, motor vehicle assembly plant,
planned Kabaale airport and expressways, oil roads, new Karuma bridge among other projects
through the supply of the needed steel from local production.

As an example, an assessment of the steel consumption and requirement for a few on-going and
planned projects is given in Table 1. Most of the steel being used for these projects is imported
and therefore the country is losing about USD 130 million yet these projects are funded by loans.
A developed iron and steel industry will put this money into the economy.

Table 1: Steel requirements for some projects in Uganda

Project Details Status Steel usage (tonnes)* Cost
(million USD)
Karuma Dam 600 MW On-going 36,000 25.2
Isimba Dam 183 MW On-going 11,000 7.7
Bujagali Dam 250 MW Complete 15,000 10.5
Jinja Nile Bridge 0.525 km (20 m deep and On-going 4,487 3.14
70 m high)
Entebbe Expressway 51.36 km On-going 21,472 15.0
Standard Gauge Railway Track length 338 km Planned 86,000 (Rebars) 60.2
(Kampala-Malaba) 6,000 (structural steel) 12.0
Total 133.54
* The steel price per tonne is taken at an average of USD 700 except for structural steel which is taken at USD 2,000.

According to information from the SGR officer in charge of local content, 90% (77,400 tonnes) of
the rebars is what is going to be sourced locally. This represents USD 54.18 million into the
economy. With 84.52% of the raw materials that make rebars (billets) being imported, it implies
that USD 45.793 million will be made to flow out of the economy for importing rebars during the
construction of the SGR. The structural steel will be imported due to lack of capacity in the country
to produce it. There is thus a need to invest in the establishment of the steel industry in order to
increase on the impact of this sector to the economy.

Furthermore, it can be observed from Figure 1 that steel consumption/imports in the EAC region
have been on a steady increase for the past ten (10) years and its projected to be 4.934 million
tonnes by 2020. By 2015, the value of the iron and steel imports into the region was standing at
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2.025 million tonnes. 70-80% of these imports are raw materials for the steel rolling mills.
Consequently, having an integrated steel plant will enable the country access a share of the EAC
market which will increase on the country’s revenue earning. If the country can tap into 20% of
this market, the benefits to the economy can be enormous.

However, penetration of the EAC market will require production of high quality products at
competitive prices. This will necessitate putting in place a conducive environment for the
manufacturers to be able to produce competitively; good transport network, low cost loans, low
power tariffs compared to the existing prices, favourable tax incentives among others.

6
5 10
EAC
Kenya
Tanzania
6
4 10 Uganda
Rwanda
Burundi
Steel consumption (tonnes)

6
3 10

6
2 10

6
1 10

0
2005 2010 2015 2020
Year
Figure 1: Steel Consumption in the EA Region (Source: TradeMark East Africa, 2015) [6]

4. IRON AND STEEL INDUSTRY IN UGANDA

Summarised information of the characteristics of the industries in the iron and steel sector in
Uganda is as given in Table 2.
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Table 1: Summarised State of the Iron and Steel Industry in Uganda(2017)

Capacity Raw materials Power Employment Products Market Investment
(tonnes/annum) usage/m (people) (USD)
onth
Installed Production Type Source
1,000,000 510,700 Hot Rolled Local, South 100 MW 5,000 Corrugated Local (70%), 1 Billion
Coils Africa, iron sheets, Kenya,
(HRC), Japan, India, wire products, Rwanda,
Galvanised China, iron bars, nails, Burundi,
coil, Wire Russia, chain link, Tanzania,
rods, Germany, barbed wire, DRC, South
billets, Egypt, expanded wire Sudan
Zinc. Lead, Ukraine, mesh, Angles,
cast iron Kenya, flats, hollow,
and mild Rwanda, tubes, Z-
steel scrap, Burundi, sections
raw iron South
ore (10- Sudan,
12%), DRC,
furnace oil Tanzania,

Overall, it can be noted that there is a total installed capacity of 1,000,000 tonnes per annum, of
which only 50.17% (501,700 tonnes) is being utilised (2017 data). Of the total annual iron and
steel production of 501,700, only about 165,000 tonnes (32.89%) are produced from scrap and raw
iron ore. This implies that 67.11% (485,200 tonnes) of the raw material for iron and steel making
in Uganda are imported, not taking into consideration the accessories; zinc, aluminium among
others.

Out of the total 165,000 tonnes manufactured through melting scrap and iron ore, iron ore accounts
for only 10% (16,500 tonnes) per annum. The ore is used mainly to refine the scrap for some
industries. Essentially, out of the 500 million tonnes of iron ore available in the country, only
0.0033% is being utilised per year.

The produced iron and steel products are mainly sold locally (70%), with some exports to the
neighbouring East African countries. The employment level and total investment for the whole
industry stands at about 5,000 workers and USD 1 billion respectively.

4.1 Value chain analysis of Uganda’s iron and steel sector

Iron and steel are produced from raw iron ore through a number of processes, which are
summarised using the train analogy in Figure 2. Some of the required information to fully execute
each phase is given in the different wagons and together the wagons represent the value chain of
the iron and steel industry. The detailed explanation of each phase is attached in appendix A.
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Figure 2: Phases involved in the production process for iron and steel.

The status of industries in Uganda’s iron and steel sector along the value chain is as highlighted in
Table 2.

Table 2: Assessment of existing industries along the iron and steel value chain
Phase
Company I II III IV V1 VI
1 2
1. International Mining Company of Uganda
2. WCH
3. Tororo Cement Ltd
4. Tembo Steel – Iganga
5. Tembo Steel – Lugazi
6. Bavima Steel Ltd
7. Madhvani Steel Ltd
8. MMI Steel Ltd
9. Pramukh Steel Ltd
10. Tian Tang Steel
11. Roofings Ltd – Lubowa
12. Roofings Ltd – Namanve
13. Steel & Tube Ltd
14. Uganda Baati
15. Viva Steel Ltd
16. EA Roofings Ltd
17. Mesha Steel

From Table 2, the following can be noted about Uganda’s iron and steel industry.

4.1.1 Phase I: Iron ore deposits, mining

Uganda has rich iron ore deposits and can therefore exploit these to establish a comprehensive iron
and steel industry, which will serve the industrialisation drive in order to achieve Vision 2040.

1
At the phase of Steel Rolling, there are two stages; 1 – Some firms import billets, reheat these and roll them into
bars and, 2 – most bring in coils and wires and roll and draw them into sheets and wires. Those starting at V-1 add
more value than their counterparts.
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Some of the natural iron ore deposits together with their estimated quantities and quality are given
in Table 3.

Table 3: Location, quantity and quality of some iron ores deposits in Uganda
District Area Ore type Exploration status Reserve
(million tonnes)
Rubanda Butare Geophysical drilling, modelling 1.1 proven
Kashenyi Mapping, pitting and trenching • 5 inferred
(to 6m) • 4 indicated
• 2.37 proved
Kisoro Kyanyamuzinda Mapping, ground magnetic • 2.37 proven
surveys, pitting and trenching
Hematite (to 6 m)
Kamena Geological mapping, pitting and • 1 resource
trenching (to 6 m)
Mbarara Mugabuzi Geological mapping, pitting and • 1.74
trenching (1.5 m)
Manafwa Surumbusa Geological mapping, pitting (6- • 2 indicated
9 m)
Namekhara • 18 minimum estimated
Mbale Nangalwe • 0.5 minimum estimated
Nakhupa • No reserve estimates
Sikusi Geological mapping, pitting,
Kabatola drilling and geochemical
Namable mapping
Sukulu • 30 minimum estimated
Magnetite
Moyo Gweri • No reserve estimate
Mayuge Nambogwe Pennisula • 1 minimum estimated
Namugongo Pennisula Geological mapping • No reserve estimates
Mukono Bwema Island
Mpata
Source: Directorate of Geological Mines and Survey (MEMD), 2017

Uganda’s iron ore deposits from the south-western region of Muko, are among the best when
compared with the top iron ore producing nations in the world [2]. According to GSMD, there is
an estimated 580 million tonnes of iron ore available in the country but quantification has to be
made to ascertain the actual reserves. New discoveries have been made in recent years in the
districts of Mbarara, Hoima, Manafwa and the Karamoja region, which could probably take the
tonnage of natural iron ore in Uganda to about 1 billion tonnes once quantified. Considering the
current iron and steel demand and factoring in growth, once utilised to supply the local steel market
alone (500,000 tonnes per year), the reserves can last the country for about 1,160 years.

It can be noted from Table 4 that 50 licenses have been given out by the MEMD to prospective
investors for developments to be made in phase one. As per the statistics at the Ministry, the current
licenses were renewed starting back in 2010, but only 2 companies have actually put investments
on the ground. These include:

i) International Mining Company of Uganda (IMCU) in Kanungu and;

ii) WCH in Kabale.
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The two investments were made prior to the presidential directive of 2011 that banned the
exportation of raw iron ore. IMCU had invested with the aim of exporting unprocessed iron ore
and WCH was supplying Steel Rolling Mills in Jinja. The presidential directive, closure of Steel
Rolling Mills, Jinja and the absence of a sponge or pig iron making plant in the country are factors
that have combined to render both companies redundant. Their combined investment is close to
USD 8 million.

Table 4: Number of licenses given out for iron ore prospecting and their performance

Region License Type Number Status Area (km2)

Western – Kisoro, EL 38 • 30 active 1,288.008
Kabale, Ntungamo, • 8 expired
Kanungu, Rukungiri, LL 2 • 1 active 0.318
Bushenyi, Mittomo, • 1 expired
Sheema ML 4 • All active 8.687
Eastern – Manafwa and EL 3 • Active 19.280
Tororo ML 1 • Active 1.122
Northern – EL 1 • Active 100.000
Nakapiripirit
Central – Mubende EL 1 • Active 39.000
Total 50 • 41 active 1,437.135
• 9 expired
EL – Exploration License; LL – Location License; ML – Mining Lease

There is need to ascertain which factors that are hindering the 50 license holders to invest in this
phase so as to provide lasting solution to boost the development of the iron and steel industry.
Those license holders that are found to be just prospectors without the necessary funds to invest in
the sector need to be brought to book.

4.1.2 Phase II: Ironmaking

No company has invested in the phase of iron making; refining raw iron ore to sponge or pig iron.
However, some companies are planning to start production in this phase in the next 1-2 years and
these include; Tembo Steel Ltd, Pramukh Steel Ltd and DongSong Group of Companies. There is
need for government support to enable this phase to take off.

4.1.3 Phase III & IV: Steelmaking & Continuous Casting

As indicated in Table 2, there are only two companies that have fully invested in this phase viz;
Tembo Steel Ltd and Pramukh Steel Ltd. These use 100% scrap to produce molten metal and make
billets through continuous casting in phase IV. These companies use up to 10-12% raw iron ore
for refining scrap.

Three companies; Roofings Ltd, Tian Tang Group and Steel and Tube, have small induction
furnaces for melting scrap to produce billets for iron bars, which process accounts for about 15%
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of their total production. The biggest part of their raw materials is billets and coils, which are
imported. The main challenges of this phase are

i) Inadequate and unreliable power supply,

ii) Unfavourable tax regime: the tax regime favours processors more than manufacturers,
which discourages investment in processing.

All companies in phase III are also in phase IV

4.1.4 Phase V: Steel Rolling

The rest of the companies in the steel sector start at this phase; importing already drawn sheets and
wires to roll into finished products. In phase V, there are companies that import billets and hot roll
these into wires and rods and there are those that import already rolled wires and draw these into
the final products of nails, wires, etc. The former add more value than the later and out of the 16
companies visited, only 3 import billets.

The companies downstream (phase IV &V) can remain in these phases and even upscale their
production as the upstream phases (especially phase II) are strengthened to supply them. The
business environment in this phase can be improved upon through;

1. Reducing the cost of power and ensuring its stability through upgrading transmission lines,
2. Providing market for the products through supplying the on-going and future government
infrastructure projects, and
3. Checking competition from imported steel products.

4.1.5 Phase VI: Market

This is the engine of the whole project; without justified ready market to absorb the products, the
venture cannot attract investment. Uganda is currently spending about USD 280 million in
importing iron and steel raw materials [7]. The East African region is currently importing 2.025
million tonnes of iron and steel products. This regional importation is projected to grow to 4.934
million tonnes by 2020 [6]. If Uganda’s iron and steel industry can target to tap 15-20% of this,
the nation’s economy realise significant benefits in terms of increased exports, revenue earning,
and employment, among others.

Further still, Uganda as a country is undertaking and planning a number of infrastructure projects;
oil roads, expressways, bridges, power dams, Kabaale and other regional airports, oil and gas pipe
lines, SGR, five (5) regional cities as per Vision 2040, which all require iron and steel in their
construction. The steel industry thus has a huge prospect of impacting the economy positively as
far as achieving Vision 2040 is concerned once invested in.

Harnessing this potential will require production of final products at competitive prices and this
calls for putting in place a conducive environment for manufacturers.
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4.1.6 Challenges Hindering Sector Growth/Industrial Development

A number of challenges were identified facing the growth of the industry. Most of the challenges
relate to production, logistics, and marketing and include;

i) High cost, low quality and unreliability of electricity/power supply. Most of the factories
operating heavy machinery require large amounts of electricity (15 MW and above). Most
experience poor quality of electricity in terms of low voltage and fluctuating supply. These
affect production (cause down time), and lead to destruction of expensive equipment. The cost
of power remains high at about UGX 400 per unit compared to UGX 100 and 50 for India and
China respectively. Hence, this raises production costs and makes locally made products less
competitive than imported products. Additionally, the plants that have galvanizing lines have
to run generators to keep the zinc in molten form when power goes off. These are non-
productive runs and add to the cost of the final products.

The major cause of power fluctuations and low voltage especially for Tororo, Tembo and
Pramukh companies is due to the fact that there is a lot of power tapping from both legal and
illegal connection on the lines that supply the factories. Tororo Cement has a direct line but
the numerous tapping of power along the way causes the interruptions. The low voltage
experienced at Tembo Steel Iganga is due to the fact that there is no feeder sub-station in Iganga
for the factory. Power is transported from Jinja and this long-distance transportation of high
voltage causes voltage drop along the way. There is need to consutruct a feeder sub-station in
Iganga.

ii) Limited access to raw material especially for industries that melt scrap for billet
production e.g. Tembo Steels Ltd and Pramukh Steel Ltd. Due to the low level of
industrialisation in the country, the supply of scrap is decreasing which increases the prices,
leading to high costs of production. There is therefore a need to find an alternative source of
raw material supply especially through use of iron ore.

iii) Transport infrastructure challenges especially for industries that import raw materials, the
lead time is on average 3-5 months between ordering and receiving the materials, which ties
up capital in the logistics chain.

iv) Limited local market and stiff competition from imported products especially on big
public projects. As per discussions with the industries, the local market is almost circulated
and the government has not put in place enabling laws to require contractors of big projects to
buy from local suppliers, which has stifled the industry growth and expansion. Furthermore,
production costs in countries like China are less than those in Uganda by almost about half,
making imported steel products cheaper and thus out-competing locally produced products.

v) Unfavourable tax regime especially for manufacturers. The existing policy does not
differentiate between manufacturers and processors and tax is applied equally to all
irrespective of phase in the value chain. This blanket tax law favours processers more than
producers thus dis-incentivising investments in manufacturing.
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Noting from Table 2, the investment required for downstream operations (phase I-III) is higher
compared to that required for upstream operations. Private investors want to recover their
finances quickly and therefore will always desire to invest were little capital is required so as
to realise quick returns on their investments. There is therefore, a need to create packages of
incentives, say tax holidays, that will attract investments in the downstream phases.

vi) Unfavourable working conditions. This was more pronounced for industries that are
involved in melting metal or reheating billets, were workers did not have adequate physical
protective gear like heat shields to protect them from exposure to intense heat. Many industries
have not fully integrated occupational health and safety measures to guard against worker
exposure to industrial risk.

5. GAPS TO BE ADDRESSED FOR ESTABLISHMENT OF THE INDUSTRY

Phase Deliverable/Tasks Cost (UGX billion)
I: iron i. The existing policy, legal and regulatory environment and how it supports 3.0
ore or hinders iron ore mining for commercialisation,
deposits ii. Defined locations of the existing iron ore deposits and prospects
(mapping); compile existing data and get data where information is
lacking,
iii. Exploration to quantify the reserves; this will involve (need to update
current information on iron ore resources in Uganda)
a. compiling existing data from DGSM and private sector to get
statistics of known resources (review geophysical, geological and
geochemical data & reports),
b. carryout pitting, drilling and trenching to know the quantities of
new discoveries and
c. do characterisation to determine the quality of the deposits.
iv. Gather information on the existence of laboratory facilities for iron ore
testing, highlighting gaps,
v. Get details of the investors at the mining phase of the iron ore chain,
vi. Number of various licenses given out, the license owners and the status of
their activities on the ground,
vii. Determine the necessary infrastructure and human resource to facilitate
iron ore mining and its status,
viii. Develop a strategy of how the small-scale miners will be integrated in
the mining phase once large scale mining starts,
ix. Analyse the possible impacts of the mining activities on the settlements
and other activities in the mining areas,
x. Analyse issues of land rights and types of ownership in the iron ore mining
areas and how these will affect the mining activities,
II: Iron i. Determine the appropriate size of the iron production plant(s) in light of 1.0
ore the targeted market and existing investments, together with the quantities
smelting of the necessary raw materials,
ii. Determine the suitable location of a sponge/pig iron plant(s) in light of
the logistical requirements for the plant(s)
 Page 14 of 19

iii. Establish the necessary logistical infrastructure for movement of raw

materials and products to and from the plant(s),
iv. Ascertain the source of the reducing agents (coal or gas) and required
infrastructure for its movement,
v. Characterise (quality and quantity) the reducing agent to determine its
properties and suitability for iron reduction,
vi. Details of the existing investments in this phase and how these will
complement the proposed establishments,
vii. Existence of infrastructure; transport, water, power, pipelines, to support
existing and on-going investments, plus those that are proposed,
viii. Capital investment required to set-up proposed plant and infrastructure,
III & i. Information on investments in the steel making phase (existing and 0.5
IV: planned); tonnage per year,
Steel ii. Information on the number of steel rolling mills having furnaces and the
making technology in use in these furnaces,
and iii. Capacities of the furnaces in the steel rolling mills,
refining iv. Information on how the existing furnaces can be upgraded to
accommodate sponge iron from phase II
v. Means of supplying existing steel rolling mills with products from this
phase,
vi. Incentives for backward integration for companies already in production,
vii. Infrastructure requirements for this phase,
V: Steel i. Number of existing steel rolling mills in the country, 0.5
rolling ii. Capacities of the steel rolling mills and their technologies,
iii. Types of inputs they use; slabs, billets or blooms,
iv. Types of and quality (grade) of the products they produce,
v. Required assistance to upgrade or scale-up their productions,
vi. Actual production and productivity of the existing steel rolling mills,
VI2: i. Iron and steel demand in the country and the region; quantity and types of 1.0
Market iron and steel imports,
ii. The on-going projects and those planned and the grades and types of steels
that they require,
iii. Get details on the investments in the EAC region in the iron and steel
industry and how these will impact on the proposed investments,
iv. Product standards in the iron and steel industry,
Total 6.0

• The work will involve teams from the Technical Working Group going to the field to gather
the required information and then analysing this and compiling reports. Consultants will
be hired to give technical assistance, guide the process and compile the data into technical
reports.

2
This phase informs the investments that are made along the value chain
 Page 15 of 19

• The work on the characterisation of iron ore deposits and reducing agents will be
undertaken by the Directorate of Geological Survey and Mines, Ministry of Energy and
Mineral Development.
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References

[1] M. Ruth, “Steel production and energy,” Encyclopedia of Energy, pp. 695-706, 2004.
[2] World Steel Association, “Fact Sheet: Steel and Raw Materials,” World Steel Association,
Brussels, 2015.
[3] J. A. Muwangzui, V. K. Andrey, K. B. Joseph and G. J. Pär, “Characterization of Chemical
Composition and Microstructure of Natural Iron Ore from Muko Deposits,” ISRN Materials
Science, vol. 2012, p. 9, 2012.
[4] World Trade Organisation, “International Trade Statistics 2015,” World Trade Organisation,
Geneva, 2015.
[5] Green Earth Limited, “Iron, Steel and Metal Processing Value Chain for East African
Community,” Trade Mark East Africa, Nairobi, 2015.
[6] World Trade Organisation, International Trade Statistics, Geneva: WTO Publications, 2015.
 Page 17 of 19

Appendix I: IRON AND STEEL PRODUCTION PROCESSES

Steel is produced by refining iron, which is extracted from iron ore; through reducing the
percentage of carbon and other chemical impurities. Different alloying elements; manganese,
nickel, chromium, molybdenum, boron, titanium, niobium, among others, are added during the
refining process to produce a required grade of steel. Two methods are used for the production of
iron and steel and these are illustrated in Figure 1:

i) the blast furnace (BF) process, where pig iron is produced, and
ii) the direct reduction (DR) processes (such as Midrex, HYL III, SL/RN processes,
among others), where sponge iron is produced.

Figure 1: Detailed illustration of the iron and steel making process and the end products

Phase I: Exploration and mining; the comprehensive iron and steel making process starts with
exploring the deposits and the mining of raw iron ore. Assaying is also done on the raw ore in
order to ascertain its quality. After mining, the ore can be used in its raw form in the subsequent
iron making processes, but it is usually upgraded to make sinters and pellets, especially for blast
furnace use, in a process known as beneficiation. This serves the purpose of improving on the
metallurgical and physical properties of the ore. The process of making sinters and pellets requires
additional facilities, which significantly increases on the cost of the iron making process. Raw iron
ores with good physical and metallurgical properties may not need beneficiation.

Phase II: The iron making process; iron contains 2-4 wt% C plus other chemical impurities. After
mining and beneficiation, the raw iron ore can be used to produce iron through mainly two routes;
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the blast furnace (BF) process, where pig iron is produced, and the direct reduction (DR) processes
where sponge iron is produced, Figure 1.

In the production of iron from its ore using the blast furnace, the major raw materials used are
coke (from coal) and limestone, which are charged into the blast furnace with a blast of oxygen
rich air through the tuyeres. Coke is obtained by baking coal in the coke ovens.

Coke is used to serve majorly two purposes; as a fuel to provide the required high temperatures
and also as a source of reducing gases. Limestone is added to form a fluid slag and to restrict the
amounts of silicon and sulphur entering the pig iron. The blast, which is heated air, sometimes
enriched with natural gas or oxygen, supplies oxygen to the process, reacting with the carbon in
the coke to form carbon monoxide, the principal gaseous reducing reagent. The blast furnace
charge thus comprises of iron ore, coke and limestone. The kinetics of iron oxide reduction are
given in equations 1-3.

3𝐹𝑒2 𝑂3 + 𝐶𝑂 = 2𝐹𝑒3 𝑂4 + 𝐶𝑂2 − − − − − − − − − − − −1

𝐹𝑒3 𝑂4 + 𝐶𝑂 = 𝐹𝑒𝑂 + 𝐶𝑂2 − − − − − − − − − − − − − −2
𝐹𝑒𝑂 + 𝐶𝑂 = 𝐹𝑒 + 𝐶𝑂2 − − − − − − − − − − − − − − − −3

The other process for iron production is the direct reduction process. Direct reduction processes
convert iron ore in the form of fines, pellets, sinter, etc into sponge iron at temperatures below the
melting point of iron itself. They differ from the conventional blast furnace process in that solid
metallised DRI (directly reduced iron) is produced instead of molten iron, and a wide variety of
reducing agents may be used in place of metallurgical-grade coke. DRI is normally porous, but
may be filamentary or even consist of finely divided particles of iron. It must be further processed
to convert it into a usable end-product.

There is a number of DRI processes and these either use coal or gas (CO and H2 mainly) as a
reductant (Midrex, HYLIII, SL/RN, etc). Midrex is the most advanced and most commonly used
DRI method accounting for about 70% of the world’s DRI.

Another method of iron production is the smelting reduction, where gasified coal is used to reduce
molten iron, though it is not in common use.

Phase III: Steel making process; the iron produced is then refined in different furnaces to make
steel; the C content in steel ranges from 0.2-2.14 wt% C plus other chemical elements. The pig
iron produced from the blast furnace is fed to the basic oxygen furnace. Here, the C content is
reduced and eventually the steel is fed to the refining furnaces.

On the other hand, the sponge iron produced from the direct reduction process is fed to the electric
arc furnace (EAF) for refining. It is eventually fed to the refining furnaces for steel production.
Scrap can also be recycled in the EAF to produce steel.

Phase IV: Casting; the produced steel is usually cast into slabs, blooms or billets, using the
continuous casting method. Sometimes the steel is cast into ingots and transported in this form for
further processing. In this case the ingot has to be re-heated before subsequent processing. The
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ingot process is however fading out fast due to an addition energy cost incurred in re-heating the
ingots.

Phase V: Steel rolling; billets are hot or cold rolled into bars, rods and wires. On the other hand,
blooms are hot or cold rolled into structural steel such as I-beams. Slabs are hot or cold rolled into
sheets or plates or coils. These are the steel products that are used to make the required final
structural products. Some of the final products from the casting and rolling processes are illustrated
in Figure 1.