Kenya signs pact with Chinese company to build steel plant

Kenya has signed an agreement with a Chinese company to develop a steel plant entrenching the growing influence of the Asian giant in the country.

Sinosteel from China will now replace Posco which was the first to sign a memorandum of understanding with the government in 2011 on construction of a steel plant.

Posco, associated with American billionaire Warren Buffet, exited the agreement citing non-commitment by the government by holding back information it considered crucial for its decision making.

“Investment in a steel plant in Kenya will significantly improve our trade balance and foreign reserve position given the significant consumption of (financial) resources in import of steel products,” said Adan Mohamed, Cabinet Secretary for Industrialisation and Enterprise Development.

Iron ore deposits have been confirmed in Meru, Kitui, Taita Taveta, Homa Bay and Kakamega while coal, required to heat the ore to remove impurities has been discovered in Kitui.

Kenya imported an estimated 1.8 million metric tonnes of steel in 2013 driving up its import bill, further contributing to the current account deficit. The demand for steel is expected to grow further based on real estate boom, road construction, the standard gauge railway and Lapsset corridor.

Last year, Kenya increased her ambitions of setting up a steel plant by contracting Maknan Consulting PVT of India to conduct feasibility studies. It was tasked with looking at the viability of setting up an integrated steel plant.

This marked a diversion from the initial plan of setting up a mini steel-plant, which relies on scrap metal, as a stepping stone to an integrated steel plant. An integrated plant uses iron ore and produces the metal in different shapes.