Outcry as scrap metal ban sends steel prices through the roof
By Mathew.Ndungu, March 11, 2022by Mathew Ndung’u
@PeopleDailyKE
As the only sector that defied the Covid-19 pandemic to report an impressive growth of 11.9 per cent in 2020, the construction industry has found itself in a hitch following an upsurge in construction materials cost that is threatening to slow down the gains the sector has continued to make This is feared may push up prices of houses, negatively impacting attainability of affordable housing agenda, an initiative by the Government as one of the pillars under the Big 4 Agenda, which ensures low and middle–income households have access to decent and affordable housing units.
The drastic rise in the cost of construction metals, such as steel is blamed on the ban of scrap metal trading whose enforcement was ordered by President Uhuru Kenyatta two months ago.
Players in the construction business claim that following the order, which the Head of State said was necessitated by an increase in the number of vandalism mainly on power line infrastructure across the country, the upsurge in steel prices and the following shortage is said has plunged the industry into crisis.
Contractors claim that the high demand for steel has seen prices of construction metals shoot up by over 30 per cent with a kilogramme currently selling at Sh130 up from Sh 90 last year.
“Recycled metal is used extensively by both the commercial and residential construction industries. It is commonly used in beams, roofing, ductwork, plumbing, and windows, among other things. Besides, eco-friendly green buildings usually, include recycled building materials, especially recycled steel,” says Juma Mateyo, a contractor.
Further, he says interior decorators, who are also an important part of construction use recycled scrap metal to manufacture indoor and outdoor furniture, such as tables, lamps and chairs and lighting fixtures.
A spot-check in various towns in Kiambu county established that most of the metal suppliers have run out of stock with some still selling last year’s stock at exorbitant prices.
Loss of jobs
In Thika town, the prices of metals are said to have doubled, stalling many construction activities that were ongoing before the ban was announced.
In many construction sites, the beehive of activities witnessed last year is no more with sites reduced to only one or two stone masons operating daily. “I used to work here alongside other stone masons, but the project stalled a month ago. The owner of this building says he can no longer afford to pay us and purchase expensive materials. We now wake up hoping he will soon resume construction works,” James Murimi, a mason at a construction site in Juja told Boma.
A section of people who had started putting up their houses before the scrap metal dealings ban say a standard three-bedroomed house that could initially cost between Sh1.5 million and Sh2 million is now costing above Sh2.5 million, a price they claim that most middle-income earners cannot afford. “I had already purchased and transported stones, ballast and sand, but I could not move any further. When I went to the hardware store to buy steel, I had to postpone my plans to build until the prices are regulated. We don’t know what caused the drastic change in prices as the quotation I was given by my engineer was different by far from what I was given at most of the hardwares I visited,” Ann Maingi, a Thika resident said.
Some of the hardware owners, such as Paul Mwangi of Jangovale Hardware in Thika town said that they are either out of stock or have doubled prices as a result of low supplies.
The situation, Mwangi said, could get worse should the persisting sharp decline in the local production of steel continues. “The construction industry is crippled, actually crawling. Things are not moving as they should as there are no construction works nowadays. Most builders have stopped purchasing materials as there is no value for their money. Some of us are selling last year’s stock at increased prices while others have run out of stock,” he added.
Rise in steel prices has also pushed up prices of other items such as gypsum boards, fiberglass panels, acoustical ceiling tile, metal studs and paint whose pricing is almost doubling.
Mwangi urged the government to find solutions to the prevailing challenges to avert possibilities of losing the focus on ensuring that Kenyans have access to decent homes devoid of their pocket sizes.
At the same time, manufacturers of steel products who did not want to be mentioned stated that they have increased prices of goods ranging from construction bars to galvanised sheets and steel tanks to reflect soaring metal prices in the market.
Real estate developers claim the existing ban on scrap metal dealings is nothing to laugh about as it carries the possibility of most Kenyans losing interest in owning homes due to unaffordability.
Cut down construction cost
Led by Mizizi Africa Homes Chief Executive Officer George Mburu, the players argue that the price of steel, transportation and other essential products and services have increased by over 50 per cent in the past few months, a situation that has hardly hit the purchasing power of Kenyans. “The ban on scrap metal has caused steel prices to rise quite fast and this could affect the attainability of the affordable housing agenda. The government should urgently intervene and offer solutions because as a country, we are not short of other alternatives of curtailing vandalism of our key infrastructure, which are important for our economic growth,” said Mburu.
The players say using recycled metal helps cut down on construction costs, as it’s much cheaper to recycle materials to make new products, rather than sourcing new ones.
Steel made out of recycled metal is made by mixing a certain percentage of scrap metal and iron ore. The ratio of ‘hot metal’ and scrap varies depending on the type, quality and strength of steel required. There are many forms of steel, each with its own specific chemical analysis to meet the various needs of hundreds of different applications.
On the other hand, Belton Ngulamu, the Chief Executive Officer of Belk Construction Limited based in the coastal region, says that the move by the President was good for the infrastructure industry, but measures to keep the market stable need to be strengthened. “The construction industry welcomes this news with mixed reactions. On one hand, this ban will help to curb the vandalism that we have witnessed on some of the projects we do. For instance, we have witnessed vandalism in some of our projects, leading to losses in the past. On the other hand, manufacturers may face acute shortage of the raw materials, leading to a disruption in the market,” he says. “Both the county and national government should ensure that the steel markets are stable and we keep on with our work as usual,” he adds.
Curb vandalism
Peter Mutwiri, a civil engineer, asserts that the scrap metal business is a major contributor to the economy and its ban has led to more losses of jobs, not only in the construction industry, but in other sectors, which may be impossible to recover unless the ban is lifted. “Metal is a valuable commodity and a scarce resource. The scrap metal industry is a major contributor to the economy of Kenya with over 20 factories operating concurrently,” he says.
He, however, agrees that vandalism of metal parts for sale to scrap metal dealers has been a menace not only to the government, but also to the private sector. “There have also been incidents of cars being stolen, dismantled and parts sold to scrap metal dealers,” he concurs, but he points out that something needs to be done about shooting up of steel prices, loss of jobs and loss of millions of shillings in revenue. “The cost of demolition of buildings has also gone up since there are no avenues to sell scrap metal parts,” he points out.
Mutwiri advises that the ban of the trade should be addressed urgently by the Kenya Association of Manufacturers(KAM), Metals and Allied Sectors. “Legal policies and guidelines are required to curb vandalism. Strict measures need to be enforced against scrap metal dealers who deal in stolen items so that sanity is restored in this industry,” he says.
Bobby Johnson, the Metal and Allied Sector Chair at KAM says that they welcome the President’s directive to ban the trade of scrap metal until further guidelines are put in place. “Over the years, we have witnessed increased vandalism on infrastructure including roads, railway lines and power lines across the country. As a sector under the association, we remain committed to working with the newly-formed Scrap Metal Council towards the development of these guidelines on scrap metal trade. We shall continue to collaborate with the Government through the Ministry of Industrialisation, Trade and Enterprise Development and industry stakeholders to support the implementation of these guidelines to the letter once they are finalised and operationalised,” he said.
John Kwanga, a welding business owner in Kisumu says that scrap metal traders have been forced to turn to the Kenya Bureau of Standards (KEBS) in order to sell the metal to them. “ The ban of scrap metal has led dealers to knock on KEBS offices as they are desperately looking for a place to sell their big stocks of metal that they had before the ban,” he says.
The increased challenges in the real estate sector comes at a time when the industry has been grappling with hitches in issuance of permits that has affected many property developers.
The industry has only been churning out about 50,000 housing units annually compared to the government’s target of 250,000 units culminating in a housing deficit of two million units, or 80 per cent deficit.
-Additional reporting by Allan Adalla