High costs, rogue traders and counterfeits the bane of steel sector investors
Friday, December 24th, 2021 00:00 | 4 mins read
Steel industry players in the country are issuing a warning concerning the safety standards of steel products being imported from overseas.
They say present domestic shortage of ore supply in China and India has resulted in high prices, and as a result, dubious importers have found ways to make quick cash by bringing in low gauge steel in the country, adding that some of the fabricated steel entering the country have serious quality defects.
For instance, while the recommended size of gypsum steel stands is 0.5 milimetres (mm), the traders would impoart the 0.2 mm gauge, which has resulted in steel that is too weak to hold structures in place.
“If you go to China, you will get anything that you order for,” says Samwel Wachira, a gypsum steel stands dealer who has been in the business for almost a decade.
“It’s not that they buy fake goods from China, but the traders get the lower version of the products, which is cheaper and that’s how it gets into the market,” he adds.
Others would import the right product, but declare the wrong code so they can pay a lower importation duty.
“There is a code for every importation that attracts 10 per cent duty, others 25 and 35 per cent and so forth.
Some importers would put in the wrong code to attract lesser duty,” he adds.
The players also say a construction boom in Kenya has created a huge market for building materials, and rogue traders are taking advantage of this demand to introduce counterfeit products into the local market.
“Illicit trade can be seen in imported steel products landing at the port at a lower price than the expected dutiable value, we see thinner gauge steel materials and lower quality paints on steel materials, we see a lot of unmarked or partially marked steel products and general non-compliance on set standards,” observes Manish Mehra, Business Head at Mabati Rolling Mills (MRM).
He explains that unauthorised factories, especially those in China and India, use low-grade steel and weak manufacturing standards to cheaply produce convincing copies of authentic construction products.
Using low-grade steel in place of structural steel cuts costs in half, effectively boosting profits and allowing the counterfeit manufacturers to undercut authentic competition.
There have been no reports of this steel being sold under another name, which would make it counterfeit, but it is trying to imitate existing materials.
The impact of illicit trade in steel products is that the final consumer is unaware of the shortcomings of these products and they end up paying for products that do not perform according to their expectations.
In effect, the consumers end up making multiple purchases, spending more to replace faulty steel building materials or faded roofing sheets, hence the adage, cheap can be expensive in the long run.
“The other impact is reduction of market share and brand erosion for genuine manufacturers who have done a lot to comply with country’s set standards to safeguard the consumers.
The government also loses, because it cannot realise its correct revenues,” he continues.
Consequently, to deal with the vice, the government has put in place measures to ensure that all steel is verified and is what traders say it is.
While this has affected the importers engaged in questionable deals, it places all dealers on the same level in that none takes advantage of others.
Mehra observes that when the government enhances market surveillance and takes necessary action to ensure that the players observe the rules that action has resulted in the temporary reduction of the counterfeits and low standard steel in the market.
However, like any other industry, the rogue traders soon discover another avenue to take advantage of consumers and proceed with their illicit trade, this confirms that it is a booming business.
“As genuine manufacturers in the sector, we are still very much affected by the deep penetration of the rogue traders in the market.
It is our hope that eventually the market will regain its integrity and the playing field will be even for all players,” says Mehra.
He recommends that the relevant government authorities should increase market surveillance right from the port of entry to the distribution channels.
He further recommend for effective administration of existing laws and regulations to increase compliance to set standards.
“We urge the government to take more stringent measures to safeguard the survivability of genuine local industries who are under threat of collapsing from the impact of illicit trade in the steel industry.
Organised manufacturers must focus on having well-planned marketing efforts to communicate to the consumers about genuine products.
The government must give suitable tax incentives on such expenses,” he says.
To create awareness on genuine products to its consumers, Mabati Rolling Mills has began sensitising its customers on how to identify such.
“We also train installers on our various products and how to install them skillfully.
Installers are important as more often they are the first point of contact for home builders and, therefore, play a critical role in helping customers select the genuine products.
Lastly we work closely with the Standards Bureau in the development of standards, we also do random tests of substandard products and share the information with relevant authorities,” he notes.
Kevin Kamau Muchai, a building and construction technologist, has noted the impact of having low standard steel in the construction industry and one of them is the collapsing of buildings.
“Since developers don’t know how to check for quality steel and at the same time aren’t willing to involve qualified engineers to conduct the exercise, they end up constructing buildings that collapse,” he observes.
He urges constructors to always check their steel in the lab for verification before use.
“When you buy reinforcement for a structure you should take one piece for each grade you are using, such as T8, T10, T12, T16.
Take them to the lab to measure the thickness of the bars then and do what we call tensile strength test,” he says in conclusion.