Chinese firm signs deal to build ‘Steel City’ in Machakos

Sinosteel Corp, China’s biggest state-owned steel trader, has signed a multi-billion-shilling deal with Kenya to build a steel plant in Athi River, Machakos County.

The deal, which was signed in Nairobi on Friday, sets in motion the much awaited ‘Steel City’ project that aims to serve the region’s growing demand for steel.

Kenya had in 2011 signed a similar memorandum of understanding with Posco, but the South Korean steel maker later walked out of the agreement citing non-commitment by the government.

Posco, which is associated with American billionaire Warren Buffet, had agreed to set up a Sh13 billion mini steel plant – which relies on scrap metal – as a stepping stone to an integrated steel plant.

This plan was later abandoned following the discovery of iron ore deposits in Meru, Kitui, Taveta, Homa Bay and Kakamega, and coal (for smelting the ore) in Kitui.

Cabinet Secretary for Industrialization and Enterprise Development Adan Mohamed said on Friday that Kenya had a demand of 1.8 million metric tonnes of steel annually at the end of 2013. This demand, he said, is predicted to grow to 2.5 million metric tonnes by 2020 and to double by 2030.

“The on-going real estate boom, standard gauge railway project construction, Lapsset corridor and the 10,000km new road network project provides an excellent off-take for steel and steel products,” he said.

Sinosteel Corpo managing director Wang Jian expressed optimism on signing the deal and stated that the flourishing steel demand from real estate and infrastructure projects makes it the right time for Kenya to invest in domestic steel plants.

The new plant is expected to sit on a 1,200-acre piece of land in Athi River, which is owned by the State-owned Numerical Machining Complex (NMC), formerly Nyayo Motor Corporation.

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