Outer Ring Road in Nairobi is one of the projects that have contributed to the increasing demand for steel. file PHOTO | NMG
Steel imports from China have doubled in the last five years driven by East Africa’s big infrastructure projects.
The surge in imports has led to a demand for 180m length ships from 120m length ships to facilitate the extra tonnage.
In
the 2014/2015 financial year the value of imported iron and steel rose
16.7 per cent to Sh88 billion due to projects such as the Lamu
Port-South Sudan-Ethiopia-Transport, Lake Turkana Wind Power Project and
the expansion of Nairobi’s Outer Ring Road, as well as the Standard
Gauge Railway (SGR), according to the 2016 Economic Survey by the Kenya
National Bureau of Standards. (KNBS).
But steel imports for construction have required adaptability, in a situation of volatility in volumes shipped in.
In 2016, for instance, KNBS reported that imports of steel and
iron dropped by 5.7 per cent to 1,442,600 tonnes on the near-completion
of phase one of the SGR, which had been a major import driver in
preceding years. However, other construction projects have since led to
renewed demand for steel.
These projects include phase
two construction of the SGR from Nairobi to Naivasha, the South Sudan to
Kenya tighway road link, and the construction of the Upper
Hill–Mbagathi link road.
There are also major
construction projects set to begin this year and span the next five
years. These include the Sh75.8 billion Kenya-Tanzania highway, the Sh62
billion Lamu-Garissa-Isiolo road, the Sh3 billion Ngong Road dualling,
the Sh35 billion phase two expansion of the Mombasa port and the Sh302.6
billion construction of the Nairobi-Mombasa expressway.
The
key projects are set to maintain the expansion in steel imports being
experienced by freight companies such as Multiple Solutions Limited.
“We
have been experiencing an influx of steel imports from China since
2013, the onset of the construction of the SGR. But despite the phase
one completion last year we are still importing 20,000 tonnes of steel,
which is double what we used to import before,” said John Orwa, Service
Delivery Manager at Multiple Solutions Limited.
In
order to accommodate the increase, Multiple Solutions Limited has been
forced to hire bigger ships. For 20,000 tonnes of steel, the company is
using a 180m length ship, which costs $80,000 to hire, spending 33 per
cent more than for the 120m length ship used initially, which cost
$60,000.
Its agents from China send the manifest on how
much tonnage they are expecting, which the freight company then sends
to the Kenya Ports Authority (KPA) and the Kenya Revenue Authority.
The
increase in steel imports means the Kenya Ports Authority (KPA) has had
to ensure enough manpower to facilitate the timely offloading of cargo
to prevent port congestion.
“A ship takes at least
three days to unload, but basically when you have less cargo, then the
manpower is also minimal. However, when the cargo size surges, there is
need to increase the labour in order to ensure that cargo is unloaded on
a timely basis. KPA ensures that the required manpower is available
once the ship arrives,” said Mr Orwa.
All
the ships whose destination is the Mombasa port must inform the KPA 14
days in advance of the ship’s arrival in order to facilitate the
handling of the cargo.
The allocation of manpower
resources then works on a first-come-first-serve basis, with the KPA
preparing for a ship’s docking on the notified day. The space is
allocated to another ship if the first-booked vessel does not arrive on
that day.
As carriers deploy larger ships in order to
meet the demand of certain products, the volume of the cargo can run the
risk of overwhelming port authorities, challenging their ability to
unload containers on a timely basis, research has found.
A
study by global shipping consultancy firm Drewry, on the operational
impacts on major ports as vessel size increases, found that while larger
ships reduce voyage costs, they increase the demands on major gateway
ports, such as the manning levels, to effectively handle increased peak
cargo volumes.
However, handling the larger ship sizes may be a long-term requirement for the Mombasa port.
The
continued development of mixed-use real estate projects such as
Pinnacle Towers and Montave, is also driving the demand of steel, and
analysts forecast that the port, which is a major trade gateway to East
Africa, will continue to experience elevated levels of steel imports
from China in coming years.
A 2015 report by the
Economist titled It’s a STEEL!’ that analysed China’s strategy in its
over-production of steel, predicted that Africa’s demand will reach
three million tonnes per year by 2050, with Beijing’s cheap pricing of
its steel attracting countries that are involved in large infrastructure
projects.
“China produces more than 820m tonnes of
steel per year, of which about 100m tonnes are exported and sold at a
discount overseas. China brought online 552m tonnes of extra capacity
between 2007 and 2015, and produces half the world’s steel,” reported a
Financial Times special report on the US steel industry.
- African Laughter
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