As Covid-19 continues to ravage the country, we asked ACCURATE STEEL MILLS Director AVRAJ BHACHU to share his reflections on the pandemic.
Covid-19 hit Kenya in the first quarter of 2020. Please tell us the immediate effect on your operations following the initial restrictions.
I think that pre-Covid, the Kenyan economy had grown quite well, and consistently so over the last decade. A larger demand has obviously meant an increase in competitors entering the market, but the last 12 months have been very challenging. We have seen a huge decline in demand during this challenging period, but we see this as temporary and expect the market to be resilient and bounce back.
Did you make any staffing adjustments like other firms?
As a commitment to our staff, Accurate Steel Mills ensured that we retained the majority of our staff and ensured that there were no salary deductions that were implemented during this entire period in a show of continued commitment to the people of our great country.
Globally, there were massive disruptions in supply and demand including huge delays and high prices. How did these affect Accurate Steel Mills?
Raw materials are commonly sourced from China, Japan, Turkey, India, Korea, South Africa and Egypt for our products. As steel is a cyclical market, one often finds that cyclicality also shows itself within freight rates and availability. In periods of market lows, freight rates are very competitive and there are many more players in the market.
However, as is currently the case, with a market high (or in today’s scenario, an “extreme” high), material variability is hugely scarce as suppliers choose to supply themselves domestically first, leaving a shortfall for international supply. With greater demand, freight rates also increase as competition for vessel allocation presents a real challenge.
The pandemic situation has not stabilized here in Kenya and even globally. In fact the new Delta variant poses a new challenge. Do you foresee difficulties in your industry in the days ahead?
Yes, the new variants pose a continued risk to the health of all Kenyans, and we encourage everyone to ensure they remain vigilant while we rise through this as a country. The industry continues to be faced with huge costs of materials, and we foresee this trend of high prices carrying on until the end of the year due to huge material shortages and fewer vessels travelling towards our borders. I think the difficulty facing the steel industry in the months ahead is not only the temporary challenges, but the longer-term shift of the market towards reducing carbon emissions and sustainable production. This means that our traditional long term supply partners are imposing export taxes and purchase of carbon credits is becoming ever more difficult. We may see this trend carrying on well into the next few years and even as manufacturers, it is always difficult to forecast exactly how large this long-term effect would be.
Many organizations appear to have adjusted to the turmoil caused by the virus. What kind of changes has your company made in order to sustain production and continue serving the market despite the uncertain environment?
It has not been an easy challenge to sustain. We have had to arrange for additional credit facilities to cater for the higher cost of raw materials but are committed to be adequately stocked for the market, while at the same time ensuring that our quality is of the highest standard as we stay true to our brand strength and that of the entire Bhachu Group of Companies.
Some private companies have been doing their part to help in the national effort to tame Covid-19. We understand you provide free medical grade oxygen. Please shed more light on this.
CSR is a very important factor for us. One of our most recent projects is a collaboration with the Nairobi Metropolitan Services L3 Hospital, which has been commissioned to provide healthcare to the residents of Kwa Reuben slum. This project is a major step in the right direction, and we have teamed up closely with NMS to work on the surrounding structure, walls and car park area development. All construction that we are providing is free, but more importantly, a continued gesture of our determination to help this community.
As you rightly mention, we also availed all of our external Oxygen capacity and have sent a direct communication to NMS to avail free refilling of Oxygen cylinders to all hospitals in the vicinity. We are KEBS approved and have all the additional purification devices to ensure the medical grade of the oxygen required is well maintained.
