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How Chinese Investments Are Reshaping Africa’s Steel Industry

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Pacific Money | Economy

How Chinese Investments Are Reshaping Africa’s Steel Industry

For China, investing in Africa’s steel industry is a strategic move to relocate surplus production capacity and address slowing domestic demand.

How Chinese Investments Are Reshaping Africa’s Steel Industry
Credit: Depositphotos

Africa’s steel industry is undergoing a significant transformation, fueled by growing demand and increased foreign investment, particularly from China. In 2024, the continent’s steel market reached 39.49 million tons and is projected to grow at a compound annual growth rate of 3.1 percent, reaching 51.86 million tons by 2034. This expansion is driven by large-scale infrastructure projects, industrialization efforts, and the need to reduce reliance on costly steel imports.

For China, investing in Africa’s steel industry is a strategic move to relocate surplus production capacity and address slowing domestic demand. China produced over 1 billion tons of crude steel in 2023, but its domestic demand is slowing due to real estate downturns and industrial stagnation. This has driven a surge in steel exports, which hit a nine-year high of 11.18 million tons in October 2024. 

In comparison, India, the world’s second-largest steel producer after China, exported only around 6 million tons of steel globally in all of 2023. The massive volume of exports highlights China’s significant need to find external markets like Africa.  

At the same time, China’s domestic steel price has dropped to around $552 per ton due to oversupply and weak demand. Meanwhile, steel prices in Africa remain significantly higher, with South African manufacturers paying between $850 and $1,200 per ton due to import tariffs, shipping costs, and inefficiencies in domestic production. 

Despite a global decline in steel demand in 2023, exports to Africa and the Middle East regions surged by over 60 percent, reaching 18.1 million tons, making Africa a crucial destination for China’s steel surplus. 

This price discrepancy coupled with global steel demand trends makes Africa an increasingly attractive destination for Chinese steel manufacturers looking to avoid trade barriers, bypass import duties, and meet rising current and future local demand. 

Meanwhile, from Africa’s perspective, these investments present an opportunity to boost local steel production, lower domestic steel prices, create jobs, and enhance industrial capacity. Countries like South Africa and Zimbabwe are leveraging Chinese partnerships to develop low-cost steel production facilities, which can mitigate monopoly pricing and drive broader economic development.

Steel remains a critical input for Africa’s infrastructure boom, which includes roads, bridges, railways, and manufacturing plants. While demand is rising, Africa has historically relied on imports to meet its needs. 

In South Africa, for example, domestic steel producers have struggled with high operational costs and competition from low-cost Chinese imports, forcing companies like ArcelorMittal South Africa to consider winding down certain operations. 

China, on the other hand, is actively acquiring and developing iron ore mines and steel production facilities across Africa. These moves align with its broader long-term strategy of securing raw materials while expanding market influence in Africa. Hebei Iron & Steel Group and China Africa Development Fund (CADFUND) have been particularly active, partnering with African governments to build new steel production hubs.

Several high-impact projects illustrate China’s growing influence in Africa’s domestic steel industry. In Zimbabwe, the Dinson Iron and Steel Company is constructing a $1 billion steel mill near Mvuma. It’s already Africa’s largest steel plant, producing 600,000 tons of steel annually since 2024. Now in phase two of its development, the project aims to reduce Zimbabwe’s steel imports and contribute $5 billion to the national economy. 

In South Africa, the Industrial Development Corporation partnered with Hebei Iron & Steel Group last year to develop a $4.5 billion steel plant that aims to increase local competition, lower steel prices, and support job creation. 

In Kenya, the Chinese-funded Fok Medical factory in Tatu Industrial Park highlights the diversification of steel applications in Africa’s manufacturing sector. These investments align with China’s broader commitment under the Forum on China-Africa Cooperation’s (FOCAC) “Industrialization and Infrastructure Development” initiatives, highlighting the role of Chinese financing in Africa’s industrial expansion.

Despite its economic promise, Chinese investment in Africa’s steel industry has sparked controversy and challenges. Environmental and social concerns have emerged, particularly in Zimbabwe, where the Dinson Steel Mill project has displaced local communities, raising concerns about inadequate compensation and corporate social responsibility. 

While increased competition can lower steel prices, it also puts pressure on local producers who struggle to match China’s low-cost production models. To ensure win-win cooperation, African governments must balance attracting foreign investment with protecting local industries and ensuring sustainable development practices.

To ensure that Chinese investment benefits Africa’s steel industry in the long term, African governments must focus on developing local steel production rather than simply relying on imports. A key priority should be building competitive steel production hubs in partnership with Chinese investors to enhance efficiency, reduce costs, and create jobs. By modernizing facilities and securing better financing terms, African nations can shift from being passive buyers of Chinese steel to active producers, ensuring long-term industrial growth.

At the same time, policymakers must take a strategic approach to foreign investment, ensuring that partnerships contribute to domestic industrialization rather than creating dependency on external suppliers. Regional trade bodies like AfCFTA and the African Union should work to harmonize policies, so steel investments benefit multiple countries rather than concentrating gains in a few isolated hubs. A coordinated strategy can help balance competition, prevent market distortions, and encourage technology transfer that strengthens local industry.

Africa’s steel industry is at a turning point, and the choices made now will determine its future. Whether countries continue to rely on Chinese steel imports or secure investment to build competitive domestic production, the key will be ensuring that partnerships align with the continent’s long-term economic goals. With the right approach, Africa can develop a robust steel sector that supports industrialization, lowers costs, and fuels sustainable economic transformation.

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