Job cuts hit steel millers as China floods markets
Devki CEO Narendra Raval. Devki says it has had to cut workforce by half as excess capacity rises. PHOTO | FILE
What you need to know:
Local steel millers are struggling to compete with a flood of cheap Chinese exports.
Devki Group says that it is currently producing 10,000 tonnes of steel a month down from between 20,000 and 25,000 tonnes.
Chinese millers are also beneficiaries of state subsidies that further reduces prices of steel products.
Steel millers say they have cut output and laid off workers as they struggle to compete with a flood of cheap Chinese exports that have hit producers globally.
Local millers say they have over the past few months gradually been reducing the amount of steel bars, nails and other products churned out at their factories as sale of the products is made difficult by Chinese imports.
Devki Group, which operates a steel mill in Ruiru town, says that it is currently producing 10,000 tonnes of steel a month down from between 20,000 and 25,000 tonnes.
Devki chairman Narendra Raval said on average the miller sells a kilogramme of steel at Sh65 but Chinese imports retail at Sh55 per kilogramme, a price he says is difficult for local firms to match. The company has been forced to trim its workforce by a half.
“I have released about 2,000 people in the last few months,” Mr Raval told the Business Daily.
Devki’s steel mills have an annual capacity of 250,000 tonnes.
Cheap steel imports have come as a result of a glut in the global market due to millers in China having excess stocks and 400 million tonnes annual excess capacity after an economic growth deceleration in the largest consumer and producer of steel.
Chinese millers are also beneficiaries of state subsidies that further reduces prices of steel products. Mr Raval said that Chinese millers get export compensation of Sh5 per kilo.
Tononoka Steel and Bhachu Industries said they were too feeling the heat from cheap Chinese imports.
“Both our steel and trailer manufacturing divisions have been effected due to this,” said Gurveer Bhachu of Bhachu Industries, a top trailer fabricator.
Hardware stores, however, were cautious and instead said the low prices are a result of the normal business cycle where demand is high on one quarter of the year and low in another quarter.
Lucy Musau, a representative of Nairobi-based Inline Supplies Hardware, said prices have gone down by between 10 and 15 per cent but attributed the fall to low demand of products.
“The Y-10 series was going for Sh690 per piece (in the first quarter of the year) now it is going for Sh600,” she said.
Ms Musau added that while there are imports from China, regional demand for the products is not as high as players in the local construction industry are selective on what they import. “Engineers are keen on quality, especially due to cases of buildings collapsing,” she said.
The problem is not exclusive to Kenya. South Africa introduced a 10 per cent tariff on the imported steel in August after lobbying from local mills and unions who said that Chinese imports were affecting business.
The eurozone steel millers are lobbying the European Union to protect local companies from ‘dumping’ of cheap steel from China.
Steel millers earlier told the Business Daily they would meet with the Kenya Association of Manufacturers last Friday to find a solution to the problem.
