Watchdog probes steel companies over price-fixing


Iron metal used for construction. PHOTO | FREDRICK ONYANGO | NMG

The competition watchdog has launched a probe into the country’s top steel manufacturers over allegations of price-fixing blamed for the elevated costs in the construction industry.

Competition Authority of Kenya (CAK) said they received information there were informal pricing arrangements in the sector and launched countrywide raids on the premises of top steel manufacturers to secure evidence.

The authority declined to name the steel manufacturer under probe but said they had raided ten companies.

The raid comes in a period where the costs of steel-based products have surged on a combination of factors including rising global demand on reopening of economies coupled with logistic challenges as well as the war in Ukraine.

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Section 31 of the Competitions Act on restrictive trade practices bars companies from colluding to determine product prices, setting minimum prices and determining when and whom to offer discounts — acts that hurt consumers and competitors.

“We received information on allegations of certain concerted practices including agreements on pricing. We conducted market screening and launched raids in December targeting over ten companies and the investigation is ongoing,” said Gideon Mokaya, CAK’s enforcement and compliance manager.

There are slightly over 30 registered iron and steel companies in Kenya, including leading players such as Doshi, Devki Steel Mills, Tononoka Steels Limited, Apex and Abyssinia Group.

The antitrust body is cracking down on cartel behaviour in a number of sectors, blamed for raising prices of commodities by nearly 30 per cent through price-fixing and market allocation.

CAK conducted a similar crackdown in the paints sector and fined Crown Paints, Basco Products Limited, Kansai Plascon and Galaxy Paints millions of shillings for collusive pricing.

Steel is a vital component in the construction industry, used to make roofing sheets, reinforcement bars, steel beams and columns, windows and doors, among other products.

Steel prices for a typical reinforcement bar called D10 increased from Sh680 in July last year to the current Sh900.

A roll of binding wires increased from Sh3,300 to Sh4,000 during the review, hitting real estate developers battling costly cement, timber and roofing materials.

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Industry players have been quick to blame the price hikes on a number of factors including roaring consumer demand in the global market and supply-chain crunch stemming from Covid disruptions.

This has been worsened by Russia’s invasion of Ukraine, with war disrupting logistics given the two countries account for a fifth of imports to the European Union.

Kenya imports raw materials to produce steel products making the sector vulnerable to changes in global prices.

The sector players have also blamed the weakening Kenyan shilling for the inflated costs.

“As manufacturers we are bearing a huge cost to cushion consumers. The prices of billets have shot up because of the supply disruptions as well as fuel for heating the furnaces. And if you factor in the currency and finance costs we are even selling below global prices,” Kenya Association of Manufacturers (KAM) Steel Sector Chair Mr Bobby Johnson said.

The competition regulator however feels the external factors may not be the only reason for the price spikes, adding that collusion has also piled pressure on costs. The watchdog said if it determines that the fluctuation is due to infringement of the Competition Act, it shall invoke the relevant provisions of law to remedy the situation.

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CAK conducts market comparison of international raw material cost trends and local ex-factory price trends to determine whether players are engaged in cartel-like behavior.

The competition regulator also tracks similarity or a pattern of costs.

CAK also probes supply chain agreements that suggest market sharing for instance agreeing on routes or managing capacity in times of shortage.

The watchdog says, besides exposing consumers, price-fixing locks out rival firms that do not agree to the collusive setting of prices.

The watchdog has cracked down on cartels in the paints manufacturers, billboards advertising and collusive conduct between certain players in the supply of electric poles in Kenya and fined them millions of shillings.

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