Steel deal hailed as fillip for local industry

Five companies compete to supply material for use in building railway

Kenya's steel industry has welcomed a decision by China Road and Bridge Corporation to buy steel bars locally that will be used to build a standard-gauge railway in the country.

Doing so will give a fillip to the country's steel makers and help create jobs, industry insiders say.

"This will not only create employment for Kenyans, but will also help improve the standard and quality of local manufacturing industries for local and export based projects," says Kevit Desai, of Private Sector Railway's Consortium, a group that advocates structured private sector involvement in the rail project.

It is also "a great opportunity for the development of the local steel industry", he says.

CRBC is buying 5,250 metric tons of steel from Kenyan manufacturers for a railway linking the coastal city Mombasa to the capital, Nairobi. The steel bars are estimated to be worth 330 million Kenyan shillings ($3.7 million). The company has previously bought smaller consignments from Kenyan steel makers.

CRBC says the company is keen to buy most of the material used in the rail project locally, which it says will be good for both the company and Kenyan businesses.

Five Kenya steel manufacturers, Apex Steel Mill Corporation, Steel Makers Limited, Devki Steel Mills, Prime Steel Limited and Tononoka Steel, presented bids to supply the steel bars at CRBC's offices in Nairobi on April 24.

Desai says CRBC's decision to buy locally could also make Kenya a more attractive destination for foreign investors.

"Access to infrastructure supplies will give more confidence to external investors to set up local industries. Nationally, this will increase our manufacturing base and create foreign direct investment. It is in line with the 'Buy Kenya, build Kenya' policy that is aimed at developing the country's ability to create new value chains geared towards strengthening local manufacturing capacity."

Prime Steel Limited, part of the Abyssinia Group of Industries and which is one of the bidders, says it has supplied more than 3,000 tons of steel products to CRBC and expects to have a role in the rail project.

The steel manufacturer says CRBC's local purchase of steel bars stands to save the Kenyan government a lot of money that could be used in important areas such as food safety.

"If iron ore is $50 a ton, we are converting that into $700 a ton," says Jateen Patel, chief executive officer of Abyssinia Group.

"We are saving the government $700 or $650 a ton that they have to pay for importing the product. We are buying locally, producing locally, creating large employment locally. The entire project could need thousands and thousands of tons (of steel bars)."

The company can produce 180,000 tons of steel bars a year, and meeting demand is no problem, Patel says.

Apex Steel, another Kenyan steel maker, has also put in a bid for the steel that will be used in the railway project.

It says it has already sold at least 10,000 tons to CRBC on various projects, including the railway. The company says it can produce 120,000 tons a year.

CRBC says the steel bars are expected to meet requirements for building culverts and bridge foundations for about three months, and the company expects to undertake another round of procurement for steel later in the year.

"We have tested the product of the suppliers (in the tendering process) in our single-gauge railway project center laboratory, and they have met the requirements for the project," says Zhang Yongbo, CRBC procurement manager for the project.

"CRBC will evaluate the tender's business, service ability, quality and price in the bidding document. Eventually, one or several suppliers will be awarded the tender."

Industry insiders say the purchasing of large amounts of steel bars will not result in shortages or spikes in prices for steel while the railway line is being built. Instead, they say, the railway will help the industry by driving up demand for steel products.

Officials of Kenyan steel makers say the industry has supplied steel to other big projects in the country and East Africa and serviced other local industries.

"Supplying steel to the project is good for the local industry," says Bharat Rao of Apex Steel.

"Our production standards are on a par with global standards. If you consider the kind of capacity that the different local companies have, then one can easily tell that the local industry can service both the construction of the standard-gauge railway and other industries with ease."

Zhang says sourcing within Kenya has the benefit of materials being obtained quickly and efficiently while at the same time helping local Kenyan businesses to grow.

"The project will play a critical role in the growth of local industries. If material is procured locally, we can avoid complicated import procedures and relieve the stress of transport."

houliqiang@chinadaily.com.cn

(China Daily Africa Weekly 05/01/2015 page19)