Firms reap from rising demand for Kenyan minerals

Rising prices of commodities in the global market and China’s decision to restrict export of raw minerals have put a fresh shine on the face of Kenya’s companies that export non metallic minerals, enabling them to utilise their full capacity.

Demand for minerals like soda ash, fluorspar, and diatomite has firmed up since the global recession began to ease in the last quarter of 2009, giving a lease of life to companies like Magadi, Kenya Fluorspar and Kenya Diatomite which had significantly scaled down operations.

China’s decision to impose quotas on mineral exports has also cut supply in the global market, helping drive prices upwards.

Fluorspar prices have recovered from a low of $170 per tonne in late 2009 to $270 per tonne, with players forecasting full recovery to the $420 per tonne level that prevailed before the global recession hit the sector in 2008.

Prices of soda ash increased from $160 per tonne late last year to between $260 and $315 in July.

“Demand is good but producers are not adjusting prices significantly because they fear losing market share under the current glut, but we expect better prices later in the year,” Magadi Soda CEO Michael Odera told Business Daily on Wednesday.

Mr Odera said the company, which relies on the export market to sell 90 per cent of its 720,000 tonnes annual production, scaled down production as the recession and synthetic minerals suppressed demand in its key export destinations.

Price recovery is set to boost Kenya’s mining industry whose earnings dropped to Sh9.3 billion last year, from Sh12.3 billion the previous year, as the recession hurt demand.

Of the five key export minerals last year —soda ash, fluorspar, salt, and gemstones — only gold reported increased earnings supported by high global prices and increased production.

Earnings from gold rose almost four times to Sh2.3 billion last year, from Sh593 million in 2008.

Prices of gold in the international market have leapt from $834 per ounce in 2008 to $1,095 by the end of last year and stood at $1,194 on Wednesday.

The high gold price is set to spur investor interest in mining, notably in Western Kenya, as listed multinationals scramble a share of the pie.

Artisan miners in villages in Kakamega, Transmara and Migori districts look set to reap as local gold dealers revise their prices upwards.

This year, the Mines and Geology department anticipates that earnings from minerals could fetch more than Sh12 billion.

This offers the country an opportunity to boost foreign exchange earnings, grow employment, and diversify its export business that is heavily skewed towards primary commodities such as flowers, tea and coffee.

China has been a dominant soda ash supplier, accounting for 17 million tonnes per annum or 35 per cent of global supply with the European Union and USA being the other major producers.

Export quotas

With China imposing export quotas on its mineral exports at the time the world economy is looking up, Magadi company is seeing better times ahead.

“It is possible for us to put the capacity that we expanded at a cost of Sh7.8 billion to full use since the global economic crisis hit us just weeks after commissioning it last year,” Mr Odera said.

Soda ash is used in making glasses and the company sees steady demand as the motor vehicle, building and construction industries pick up.

Central Bank of Kenya notes that production of soda ash increased by 65.6 per cent in the first quarter of this year, from 64,006 tonnes over a similar period last year to 105,977 tonnes.

To stay afloat, company managers say they are maintaining tight control on operation costs to cut high fuel and electricity prices.

Rising fluorspar prices have led Kenya Fluorspar to reopen its premises after a 15-month lull. Rock bottom prices forced the company to suspend operations early last year, just weeks after its management completed upgrading of its extraction facilities at Sh120 million.

“We remain optimistic that the global economy will continue its recovery and specialist manufacturing companies, who are the major users of fluorspar, will increase production,” said Kenya Fluorspar company’s managing director Nico Spangeberg on phone.