Rise in price of steel to hurt construction industry

The price of steel - a key component in construction - has shot up, global market trends show. This is likely to dampen a booming construction industry and the many ongoing government projects including the Standard Gauge Railway.

However, local manufacturers some of whom are still smarting from low prices of finished steel for the better part of 2015 are still safe.

From the end of 2014 and the entire 2015, consumers enjoyed low prices of steel as the metal lost $280 (Sh28,560) per metric tonnes or 57.14 per cent for the better part of 2015 from $490 (Sh49,980) per metric tonnes in January of 2015.

But now the prices have started going up with some quarters capping the increase at 64 per cent. The price has risen from $ 300 (Sh30,600) in December and $500 (Sh51,000) as at April this year. Experts in the steel industry have noted that Chinese steel industry will shrink fast enough to reduce its exports, preventing a repeat of last year’s global price collapse.

Last year, local millers through their umbrella body Kenya Association of Manufacturers (KAM) called for an additional duty of $250 (Sh25,500) per metric tonne of imported finished steel to prevent entry of cheap Chinese steel into the Kenyan market.

Efforts to reach the head of steel at the Kenya Association of Manufacturers, Kortni Rao, were unsuccessful as his phone went unanswered.

Nonetheless, the local manufacturers and traders in steel have capitalised on the windfall. The managing director of Brollo Kenya, a steel manufacturing firm, Kethan Doshi confirmed that indeed for the last one and half months prices of steel have gone up. He told Weekend Business that he has since increased the prices of steel by between 20 and 25 per cent, adding that this was a golden opportunity for them to recover some of the losses they might have suffered from the depleted stocks. “This is an opportunity we cannot miss,” he said.

Doshi is however alive to the reality that the increase in price might be short-lived due to local competition.

Sanjay Patel of Maruti Steel also confirmed that global prices have shot up forcing them to increase theirs by 10 to 12 per cent which is lower than the overseas increase of 64 per cent.

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