Materials & Supplies

Steel Prices Drop 27% on China Real Estate Slowdown

Prices have dropped by about 27% in the last nine months.

Updated on

October 10, 2022

A steel factory in China. — Workers pack steel rolls in a steel factory in China. PHOTO | AFP

China’s diminishing steel demand and falling prices of the metal have eased financial pressure on Kenyan builders who have been struggling with the high cost of building materials.

Both the local and international steel markets have recorded double-digit price declines as Chinese steel manufacturers flood the market with their products.

According to the chairman of the Kenya Metal and Allied Sector Bobby Johnson, steel prices have fallen significantly since January in line with the global market.

“In January, the price of refurbished steel bars was Sh130 per kg, plus VAT, which has significantly reduced to Sh95 per kg. For steel tubes the price has gone from Sh160 to Sh120 in the period,” Mr Johnson said in an interview.

However, the prices rose to Sh180 per kg at the beginning of April in the wake of a major escalation of the Russia-Ukraine conflict, which started in 2014.

A sharp slowdown in new housing in China is currently underway as the central government tightens financing for indebted developers.

This has forced Chinese steel manufacturers to flood the international market with the metal, which has triggered a downward correction in steel prices.

On September 26, a tonne of steel traded at $1,372 (Sh164,640) down from $2,052 (Sh246,240) in April, according to the New York Stock Exchange steel index.

China is the world’s largest producer and consumer of steel.

It accounted for 57% of the world’s steel production in 2020, when it became the first country to produce more than a billion tonnes of steel.

Prices of some steel products had shot up by nearly half in March driven by supply fears related to Russia’s invasion of Ukraine on February 24, 2022.

Both countries account for about 20% of the global export of steel.

The happenings in China have helped the situation for Kenyan steel importers who are contending with a record depreciation of the shilling against the dollar.

A weakening shilling raises the cost of imported goods.

Steel is one of the most widely used building materials today, mainly because it is versatile, durable, and affordable.

The commodity is used for a myriad of different projects, among them bridges, roads, railways, airports, residential estates, and office blocks.

Falling steel prices have come as a relief to Kenyan builders who have been struggling with high prices of building materials such as cement, iron, and timber.