A storm is brewing in the steel industry, threatening the existence of domestic manufacturing and challenging the country’s industrial ambitions. At the centre of this storm are allegations of rampant contraband, unchecked duty-free imports, and the authorities seemingly oblivious to the plight of domestic producers. This complex scenario unfolds against a backdrop of economic upheaval and a growing demand for construction materials, painting a picture of an industry at a crossroads.

The Ethiopian Basic Metals & Engineering Industries Association, representing 76 members, has sounded the alarm.

Solomon Mulgeta, the general manager, forcefully warned of a looming collapse shortly.

“We’ve three months before collapse,” he said.

The evidence of this impending crisis is already visible. In the past year alone, 28 manufacturers of galvanised sheets have shuttered, and 15 producers of reinforcement bars are teetering on the brink of failure. Industry operators blame a deluge of steel from Turkiye flooding the market, undercutting local prices.

The industry’s performance in the recent fiscal year tells a tale of underachievement. Against a target of 343,105tn, only 52pc was realised, with goods worth 4.85 billion Br produced. This shortfall revealed the industry’s crisis, from large stockpiles to policy gaps. Notably, the automotive sector, closely linked to the steel industry, faces similar challenges, including a lack of transparency in government auctions and a preference for imports over local materials.

Exports, too, have been lacklustre. Ethiopia earned 30 million dollars from exporting metals, electric, and electronic products last year, falling short of its potential.

For people familiar with the industry, this crisis is not just about numbers; it is a story of investment, ambition, and potentials derailed. Having invested hundreds of millions of Br, steel producers find themselves outmatched by a market skewed in favour of imports. A recent import of 300,000tn of steel products by a single buyer was a move that has sent ripples through the industry. The price disparity was stark. Imported steel, exempt from Value Added Tax (VAT), was sold for up to 90 Br a kilogram in the construction input market, 30 Br lower than domestic manufacturers could offer.

"A domestic supply shock is abound," Solomon warned.

These differences are not a matter of economics but a reflection of a broader issue of policy and regulation—or the lack thereof, say industry leaders.

The Association has formed a sub-committee comprising managers of four companies, including industry leaders like Adama Steel Plc, to conduct an in-depth survey to combat the deluge. Yet, this initiative seems like a small step against a tidal wave of challenges due to the government’s role or its absence.

Wondifraw Belete, a member of the Association, blamed the government for ignoring the plight of steel producers. This accusation gains weight when considering importers’ alleged misuse of duty-free privileges in large-scale projects such as hotels and housing.

“Something has to be done before we disappear,” Wondifraw told Fortune.

The Ethiopian Customs Commission (ECC) finds itself at the centre of this blame whirlpool. Its Deputy Commissioner, Muluwork Derese, pointed her figures at the lack of clear definitions and specifications for raw materials in steel production. She recalled an incident a few weeks ago where steel as large as six meters was declared as input for industry. This ambiguity has opened a Pandora’s box of monitoring challenges, allowing the import of large steel materials under the guise of industry inputs, she conceded.

“The Ministry of Industry should have addressed this,” said the Deputy Commissioner, "not us."

Ministries have been drawn into the fray, after the disgruntled manufacturers addressed their plights to the ministries of Finance, Revenues, Mines, Trade and Industry a few weeks ago, urging policy intervention to aid their cause.

Last week’s meeting at the Nexus Hotel, near the Gerji Mebrat Hail area, brought on board manufacturers and officials from the ministries of Revenues and Mines.

The response from Eyob Bekele, head of mining development at the Ministry of Mines, was one of surprise and concern, revealing a disconnect between the industry’s reality and the authorities’ awareness.

“If this is happening, it’s a crisis,” Eyob said.

While expressing shock at the situation, officials of the Ministry of Mines urged that a solution may be in the offing. Prioritisation in foreign currency allocation and shifting towards local substitution of imported inputs are being considered.