Prices of roofing sheets that shot over the roof in the wake of Covid-19 two years ago and gradually reduced, have started rising again.
This is attributed to the tiff between Russia and Ukraine.
Steel prices had started coming down slightly in January this year, but since last week, they started going up again, due to the conflict between Russia and Ukraine according to Mabati Rolling Mills Chief Executive Manish Mehra.
Mr Mehra says the price has skyrocketed to nearly double the pre-Covid-19 price of about $1200 (Sh136,596) per tonne.
The weakening of the shilling, which has been sustained for the longest time during the pandemic, has not helped importers much.
With the country depending on the importation of steel to manufacture roofing sheets, local companies hit a snag when steel prices struck unprecedented highs.
But that was not all. The only locally produced steel is what is availed due to the recycling of scrap metal.
Rhino Mabati founder and chief executive Andrew Muriungi says the demand that was brought about by the resumption of construction activity in 2021 sent all alarm bells pealing in the industry.
The steel demand went up almost suddenly, but supply, which had slowed down due to the elongated lull in activity beginning with the onset of the pandemic, was unable to catch up.
“This is not an investment you cannot increase overnight,” he says about steel producers struggling to ramp up production.
There had also been serious logistical issues that hampered supply as global supply chains were disrupted.
Covid-19 brought in logistical challenges that saw vessels halt business, leading to longer delivery periods. This increased freight charges almost two-fold.
That China, the world’s biggest steel producer, was responsible for one of the strictest lockdown measures did not help matters. Other steel producers rushed to satisfy demand but were overwhelmed by the huge demand before they were forced into closures.
When the reopening happened, Mr Muriungi says China scraped off incentives for steel exports. The government favoured production for the local market as their infrastructural projects came back to life.
“If China is undergoing construction activity, they will first support their domestic projects,” he says.
Mehra avers on the policy change. “During the Covid-19 period, China (which produces about 60 per cent of the world’s steel) changed its policies on steel exports. As a mitigating factor and to spur their economy on, the government pushed for more locally produced steel for their infrastructure projects,” says Mehra.
“The impact on supply chain disruptions on the availability of steel and increase in steel prices last year dragged into this year as well.”
The steel prices have started moderating recently. However, although the uncertainly about the availability of steel continues, Russia, making true its threat and invading neighbouring Ukraine makes everything complicated once again. And while China and India lead the pack in the production of steel, both Russia and Ukraine are major producers of iron ore and aluminium, says Mehra.
Australia, Brazil, China and India rank among the highest producers of iron ore, but Russia’s contribution to the global supply cannot be ignored. The prices of roofing sheets might feel the effects of this growing tiff, too.
But even as the pandemic raged, the local construction industry experienced an upturn. According to the Kenya National Bureau of Statistics (KNBS) Gross Domestic Product (GDP) report for the third quarter of 2021, the construction sector demonstrated growth, albeit slower than in a similar period in 2020.
“The sector recorded a growth of 6.4 per cent in the third quarter of 2021 compared to 12.5 per cent growth in the third quarter of 2020. The volume of cement consumption grew by 27.5 per cent from 2.03 million tonnes in the third quarter of 2020 to 2.59 million tonnes in the corresponding quarter of 2021, pointing to the sustenance of activities in the sector,” the report read.
“However, there was a decline in import of quantities of some construction materials such as petroleum bitumen and iron and steel during the review period.”
Mehra says the uncertainty in the period had people opting to construct houses, against all odds.
Realising they had been cramped up in small spaces now that they were holed in with their families, and unsure if another pandemic was going to strike, those who owned pieces of land, or had some savings, started constructing houses. Many did it in the countryside.
“From savings and unsure how to sustain their future, there was a trend where Kenyans decided to construct and own their own homes lest things got worse. There was, therefore, a building frenzy with demand for construction building materials including roofing sheets going up,” he says.
Muriungi says those who could go for alternative roofing materials did so. Many changed their housing designs to open terrace rooftops. But those who had commenced construction and could not tweak their designs found themselves in something of a fix.
They could continue with their projects and once they got to the roofing stage, they realised the roofing sheets were more expensive than the original bill of quantities they had stipulated.
They could then either go for cheaper roofing sheets (lower gauge) or pay way more for their desired sheets.
They were, however not assured of getting the roofing sheets they wanted and could probably just access the dearer alternatives. “Local manufacturers had to apply a wait-and-see approach. If we imported a bulk at the market price at the time and thus overstocked, then we would have quite a situation once the prices stabilised,” says Muriungi.
But the prices did not go down. They kept rising until there came a ray of light at the start of the year that is now looking to dim amid a building war in Eastern Europe.
The steel demand, however, remains high now that infrastructural projects are back in full force, both by public and private sectors.
“As a country, we have seen a lot of construction going on in roads and real estate. Most of the infrastructural projects are government-led either as legacy projects or tied to The Big 4 Agenda,” said Mehra.
“This is a confirmation that use of steel will continue for a long time as it is a major component in the construction industry and other industries. Steel is also one of the most environmentally friendly materials on earth because it can be recycled up to 99 per cent. Steel guarantees strength and longevity and for that reason, it is preferred in construction.”
Mehra also says that Kenyans associate roofing sheets with quality housing and generally as a sign of improved lifestyle.
“Roofing products in our market are graduated in line with the amount of disposable income one has. Unpainted corrugated roofing sheets are still the most popular. However, this is changing. Painted corrugated, box and tile profile sheets are gaining traction,” he says.
“There is a growing appetite for stone coated steel sheets. However, this is still tiny. Issues affecting the supply chain for the raw material will always impact the final cost to the end-user, this is currently the case.”
According to Mehra, the spending patterns of the Kenyan consumers could get impacted by socio-economic factors such as the schedule of school fees, drought in some parts of the country and the upcoming elections.
Muriungi expects things to get better in the foreseeable future as funds that had been redirected to other activities during lockdowns get rechanneled into construction.