Kenyan consumers feel the heat of rising metal prices

Manufacturers of steel products have increased prices of goods ranging from construction bars to galvanised sheets and steel tanks to reflect soaring metal prices in the global market.

Devki Steel Mills, Kalu Works, and Insteel Ltd are some of the companies that have increased prices of their products by between seven and 20 per cent since the start of the year.

The companies have warned that the prices could rise further, in tandem with rising production costs, as they race to protect their profit margins.

In the past two months, the price of basic steel has risen 33 per cent in tandem with an increase iron ore and coal prices.

Analysts, quoted by the Financial Times, expect commodity prices to rise by up to 66 per cent this year.

“We have adjusted the prices of steel bars by 21 per cent from Sh70 per kg to Sh85 in the last one month in order to accommodate adjustments on the cost of raw materials,” said Mr Raval Narendra, the managing director of Devki Steel Mills.

Issued alert

The firm also increased the price of iron sheets by seven per cent. Similar comments were expressed by Axel Engineering and Manufacturing, which deals in steels products such as tanks, motor vehicle bodies, and steel frames for telcom firms and housing.

“Our steel tanks which are currently going for Sh80,000 are going to rise further as suppliers of steel have issued an alert that prices are on an upward trend,” said Mr Jackson Katogo, the firm’s managing director.

The cost of metal-related products including reinforcement metal, window frames and door panels are expected to increase.

This outlook is set to affect that real estate market, pushing home ownership beyond the reach of a large segment of Kenya’s middle class.

Tenants could also feel the heat as landlords adjust rent upwards to capture the additional costs incurred in building new homes and repair of established homes.

Prices of construction material have been fairly steady since the property market meltdown in the US brought a buoyant commodities market to an abrupt end in the third quarter of 2008.

Steady recovery in key markets such as China and India has however increased demand for commodities forcing analysts led by the International Monetary Fund (IMF) to forecast that the current rally in prices will continue in the near term.

“Commodity prices bottomed out in February 2009 and have staged a sharp rebound thereafter,” said the IMF in its latest global update on the economy.