Steel Makers Sound Alarm as 64% of Production Capacity Lies Idle

Kenya's steel manufacturers are operating far below their full production capacity, with industry players saying that about 64 per cent of installed output remains idle. The situation reflects weak demand, rising imports and high production costs that continue to affect the sector.

Manufacturers say local factories have invested heavily in modern equipment and expanded production lines over the years. However, many plants are now running at only a fraction of their potential, leaving expensive machinery and facilities underused.

According to industry representatives, the low capacity utilisation is driven by several factors. These include increased imports of finished steel products, expensive electricity, high financing costs, and a slowdown in construction activity across the country.

The steel industry plays an important role in Kenya's economy by supplying materials used in buildings, roads, bridges, factories, and other infrastructure projects. When production falls, the effects are felt across construction, manufacturing and employment.

Manufacturers argue that local firms can meet a larger share of Kenya's steel demand if market conditions improve. They believe higher utilisation would increase production, create jobs and reduce the country's dependence on imported steel products.

Industry officials have also raised concerns about unfair competition from imported products sold at very low prices. They say some imports enter the market below normal production costs, making it difficult for local manufacturers to compete fairly.

The industry is calling for stronger enforcement of quality standards to prevent substandard steel products from reaching the market. Manufacturers argue that strict inspections would protect consumers while supporting companies that comply with local regulations.

Energy costs remain another major challenge. Steel production requires large amounts of electricity and manufacturers say high power tariffs continue to reduce competitiveness compared to producers in countries with lower energy costs.

Access to affordable financing has also become more difficult. High interest rates increase borrowing costs, making it harder for companies to expand operations, upgrade equipment or maintain healthy working capital during periods of slow demand.

Construction activity has also slowed in some segments, reducing demand for steel products. Developers have delayed or scaled back projects because of higher financing costs, slower property sales, and changing market conditions.

Despite these challenges, manufacturers remain optimistic about the industry's long-term prospects. Kenya continues to invest in infrastructure, affordable housing, industrial parks and transport projects that require significant quantities of steel products.

Industry players say government-led infrastructure programmes could provide an important boost for local manufacturers if procurement policies encourage greater use of locally produced steel wherever possible and where quality standards are met.

The manufacturers also want stronger collaboration between government agencies and private companies to address barriers affecting production. They believe policy reforms could improve competitiveness and attract more investment into the sector.

Experts note that increasing local steel production could help strengthen Kenya's manufacturing base while supporting the country's industrialisation agenda. Higher factory utilisation would also improve efficiency by spreading fixed operating costs across larger production volumes.

The sector directly and indirectly supports thousands of jobs in manufacturing, transport, engineering, mining and construction. Increased production would therefore have wider economic benefits beyond the steel factories themselves.

Manufacturers say improving transport infrastructure, lowering production costs, and ensuring fair competition would help restore confidence in the industry. They also support measures that encourage innovation, efficiency and investment in environmentally responsible production methods.

The industry believes Kenya has the technical capacity and skilled workforce needed to expand steel manufacturing. What remains is creating a business environment that allows local producers to compete effectively against imported products while meeting growing domestic demand.

As discussions continue between manufacturers and policymakers, industry leaders hope practical solutions will emerge to reduce idle capacity. They say unlocking the unused 64 per cent of production capacity would strengthen local manufacturing, create employment and contribute more to Kenya's economic growth.