EAST AFRICA SPECIAL REPORT: Meet the market movers
A boom in construction is driving growth in East Africa’s steel industry. In the first of a series of reports, Nina Nasman gives a rundown of Kenya’s and Tanzania’s biggest names in steel.
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The rapid growth of East Africa’s 150-million strong population has seen housing stocks come under pressure, prompting construction firms to embark on ambitious projects in a bid to close the deficit.
With GDP up by an average of 5% across the region in 2012, commercial and residential construction is pushing up sales of East Africa’s steel products, which range from rebar and wire rod to cold rolled coil, galvanized sheet and pipes.
Locally sourced scrap feeds the region’s crude steel producing electric arc furnace (EAF) mills, but the bulk of steelmaking activity is focused on manufacturing downstream products, made largely from imported hot rolled coil (HRC) and billets.
East Africa’s lack of commercial domestic iron ore production means that blast furnaces are not in favour in the region.
Steel manufacturing in East Africa started with companies such as Kenya’s Corrugated Sheets and the Safal Group after the countries in the region regained their independence in the late 1950s and early 1960s.
Hot rolled coil at Mabati Rolling MillsSince the early 2000s, new market entrants including Tuffsteel and Kamal Steel have increased competition in the sector, which is dominated by family businesses with Indian origins.
In Tanzania, the combined production of corrugated iron sheet, rolled steel, steel sheet and billet reached 261,346 tonnes in 2012, up from 172,394 tonnes in 2008, according to data from the country’s National Bureau of Statistics.
In Kenya, the value of iron ore and steel imports increased by 82% from 2008 to about KES63.338 billion ($730.6 million) in 2011, while export values rose by 68% over the same period to KES18.161 billion ($209.5 million), according to Kenya’s National Bureau of Statistics.
Anecdotal figures offer a larger estimate of market size, but the lack of reliable and recent data makes the exact growth of the market difficult to judge.
Kenya – galvanizing trailblazer
As the most developed economy in the region, Kenya also leads the pack in steelmaking.
Kenya’s largest steelmaker is Devki Steel Mills, established in 1994 and headed by Narendra Raval.
Devki had crude steel output capacity in 2011 of 250,000 tpy, according to the US Geological Survey (USGS), which it manufactures into products including billet, rebar, wire rod, plate and sections.
Rebar in Kenya is commonly twisted rather than deformed
One of Devki’s main competitors, particularly in the construction industry, is Mabati Rolling Mills, the flagship business of Africa’s largest steel roofing provider, Safal Group, which has operations in 11 countries on the continent.
Mabati imports most of the HRC needed for its coil-coating operations from Nippon Steel in Japan on long-term contracts.
The steelmaker’s key pickling and rolling lines are in the Kenyan port city of Mombasa, where Safal installed Africa’s first zinc-aluminium coating line.
Together with its coating and profiling operations in Athi River near Nairobi, Mabati has an installed capacity of 200,000 tpy of cold rolling, 150,000 tpy of metal coating and 40,000 tpy of colour coating.
Kenya-born Manu Chandaria, one of East Africa’s leading industrialists, chairs the Safal Group, set up in Mombasa in 1962, with Neelesh Shah as chief executive director.
Mombasa-based Corrugated Sheets, established in 1958, is another significant participant in the sector. Its rolling mills, welded tube and pipe mill and colour coating lines have capacity of more than 100,000 tpy, according to the company’s website.
While most companies are focused on fulfilling domestic steel demand, some 20% of Mabati’s finished steel production is exported to neighbouring landlocked countries.
Steelmakers also target distribution markets through local traders to increase market penetration.
Tuffsteel supplies sections and tube, among other products
Tuffsteel, set up by Kenya-born Briton Mukesh Patel in 2007 – who followed his family’s steel footsteps in Kenya – ranks among the country’s largest steel distributors, delivering 300 tpd of steel products sourced from local mills such as Devki.
Kenyan, and more widely East African, steelmakers also face increasing competition from imports as interest in the region’s growth story builds in steel producing-countries such as Turkey, Egypt, South Africa and India.
Other steel companies in Kenya, typically located near Nairobi or Mombasa, include Standard Rolling Mills, Brollo Kenya, Rolmil and Kenya United Steel, a subsidiary of local conglomerate Alam Group.
Tanzania – regional supplier
Aluminium Africa (Alaf) is Tanzania’s oldest steel company and has gone through both a nationalisation and a privatisation since its establishment in 1960.
As part of the region’s Safal Group, Alaf’s main focus is on the construction and roofing market. It produces cold rolled steel coil and sheet as well as aluminium and zinc-coated coil, and currently has a 70,000-tpy metal coating line capacity.
Roofing profiles are popular products for the region’s construction industry
The steelmaker sells 75% of its products to the Tanzanian market via its three service centres around the country. Exports to neighbouring landlocked countries such as Malawi, Zambia and the Democratic Republic of Congo make up the remaining 25% of its sales.
Kamal Steel is an Indian-owned family-run business set up in 2004 after chairman Gagan Gupta moved to the East African country.
With capacity of 80,000 tpy, the bulk of its scrap-based production consists of rebar products for the domestic construction industry, with some exports on an on-demand basis.
Tanzania’s state-owned housing and building constructor National Housing Corp is listed among Kamal Steel’s customers.
Construction of the port authority building in Dar Es Salaam
MM Integrated Steel Mills is another prominent participant in Tanzania’s steel sector, with a capacity of 35,000 tpy of corrugated iron sheets, according to USGS. It also produces coated sheet, rebar and black pipe, among other products.
Established in 1995 as part of Tanzanian Subhash Patel’s Motisun Holdings industrial group, MM Integrated has expanded beyond the country’s borders to invest in steel mills in Zambia and Uganda as well.
Other steel companies in Tanzania, mainly located in Dar es Salaam, Arusha near the Kenyan border, and Mwanza by Lake Victoria, include Steel Masters, Sayona Steel, Sita Steel Rollings, Nyakato Steel Mills and China-owned Tanzania Steel Pipes.
However, AMS Steel Mills and the Dar Steel bar and sheet factories were closed in May this year because of missing certifications.
Concern over the quality of locally produced steel has prompted Tanzania’s Bureau of Standards (TBS) to conduct surprise checks at mills, particularly after the fatal collapse of a 13-floor building in central Dar es Salaam at the end of March.