Rachid increases some steel export duties; defends February's levied duties on cement

Ahmed A. Namatalla
4 Min Read

Beshay Steel lowers ex-factory rebars price to LE 3,250 per ton

CAIRO: The Ministry of Trade and Industry (MTI) raised the export duty for select steel products Wednesday from LE 160 per ton to LE 180 per ton, reinforcing February’s levied duties on cement and steel exports.

In announcing the decision, Minister Rachid Mohamed Rachid said the move is directed at increasing the level of competition on the local market, citing the gap between local and international prices. Rachid defended the ministry’s decision by pointing to the imposition of export fees on iron ore in India last month, China’s lifting of rebates on steel exports since 2004, and the ongoing negotiations within the European Union to cap mobile phone rates.

“This is not a practice unused today in the world, Rachid said. “This is totally acceptable even by [World Trade Organization] standards.

Rachid said the MTI is now working jointly with the Council of Ministers Economic Cabinet to develop a 15-year energy policy to be announced within the next two to three months. Rachid did not specify whether the policy would include phasing out energy subsidies for the industrial sector but said it will help investors in long-term planning.

The government’s 2006-07 budget allocates LE 40 billion for energy subsidies, of which LE 7 billion are slotted for the industrial sector.

Rachid also said MTI does not plan for the permanent imposition of export duties, but only until increased competitiveness is achieved on the local market and as long as export competitiveness is maintained.

HC Brokerage Cement Analyst Nemat Allah Choucri says Wednesday’s decision is not likely to impact current exports since it does not include flat steel and rebars. Still, she adds cement producers will now have to reduce margins on exports to some markets, depending on transportation costs, in order to stay competitive.

MTI’s decree amendment raises export duties on four out of nine steel product classifications including billets and semi-finished products, but does not include flat steel and rebars, which make up the majority of exports. According to MTI figures, local manufacturers exported 900,000 tons out of 4.3 million tons of steel produced in 2006.

Since implementation of the duty exports, cement and steel ex-factory prices have registered slight drops, going below LE 350 and LE 3,500, respectively. Rachid declined to link the increasing prices in both sectors to monopolistic practices by major producers, saying the matter is still under investigation by the 2006-formed anti-trust commission. The commission is due to release its findings by mid-summer, he said.

About 60 percent of Egypt’s 38 million tons in annual production is controlled by Suez Cement, after a series of acquisitions in 2006, and Orascom Construction Industries. The National Cement Company, of which the government owns 95 percent, captured 9 percent market share in 2006. On the steel side, Al Ezz Steel Group has grown to control 67 percent of the local market after raising its stake in Al Ezz Dekheila Steel Company to more than 50 percent last year.

Prior to signing the decree, Beshay Steel, the country’s second largest producer announced yesterday it is reducing its ex-factory prices on rebars to LE 3,250 including tax and transportation fees for the rest of March. As of press time, Al Ezz officials could not be reached for comment.

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