A big chunk of the country’s installed steel production capacity remains idle despite rising demand driven by a construction boom, fuelled by the government’s affordable housing programme, manufacturers said, highlighting the challenges facing local manufacturers even after years of trade protection.
The Kenya Association of Manufacturers (KAM) says local steel mills are operating at just 36 percent of their installed capacity of 4.2 million tonnes, leaving nearly two-thirds of the country’s production potential unutilised.
Speaking during the opening of the East African Steel Summit in Nairobi, KAM Chief Executive Tobias Alando said Kenya’s steel industry has evolved from manufacturing simple products into a diversified sector producing hot and cold rolled steel, wire products, tubes and pipes, fabricated steel and aluminium products, but remains far from operating at its optimum.
“The industry accounts for about 13 percent of Kenya’s manufacturing sector and contributes approximately Sh34 billion in taxes annually. However, much of the country’s steel production capacity remains unused. The sector has an installed capacity of 4.2 million tonnes but currently operates at only 36 percent of that capacity,” said Mr Alando.
Manufacturers attributed the low capacity utilisation to high production costs, expensive raw materials, cheap imports, declining exports and unpredictable tax policies, and urged the government to introduce measures that would make locally produced steel more competitive.
The appeal comes despite the industry already benefiting from significant trade protection. Kenya imposes a 35 percent import duty on finished iron and steel products—higher than the 25 percent East African Community Common External Tariff.
The government also levies a 17.5 percent Export and Investment Promotion Levy on selected imported steel products to encourage local manufacturing and value addition.
According to KAM, increasing local steel production would enable Kenya to meet growing demand from affordable housing, roads, railways, ports and energy projects while reducing dependence on imports.
The government has identified steel as a strategic industry under the Bottom-Up Economic Transformation Agenda and plans to establish an integrated iron and steel mill at an estimated cost of Sh220 billion over five years.
KAM Metal and Allied Sector Chairman Bobby Johnson said the industry remains central to East Africa’s infrastructure ambitions, urging governments to strengthen enforcement against substandard imports and harmonise standards across the region to create a level playing field for local manufacturers.
