CAIRO: Prosecutors are investigating 11 steel merchants for allegedly increasing prices of steel on the market without justification, the Ministry of Trade said on Wednesday.
The ministry said in a press statement that investigations revealed that major steel merchants across five cities – Cairo, Alexandria, Sharqeya, Ismailia and Beni Suef – violated provisions of the ministerial decree regulating sale of steel on the market and unjustifiably raised consumer prices.
Consequently, financial police confiscated 1,500 tons of steel worth LE 7.5 million.
“This news is encouraging in the sense that the authorities are waking up to the fact that it is not the producers who are causing an unjustified rise in construction costs but the wholesalers and retailers, said a source at Beltone Financial.
Steel prices have been soaring since the beginning of the year, with market heavyweight Al Ezz Steel Rebars raising this week its ex-factory selling prices for long products (rebars) and flat products to an average of LE 4,250 per ton ($770) and LE 4,300 per ton ($780), respectively.
Steel currently sells at record highs of more than LE 5,600 per ton, up from LE 3,900 last December. Similar price increases are expected throughout the year.
Steel producers justified domestic upsurges in the sector to leaps in international markets and rises in prices of raw material, which “directly affected production costs. Al Ezz Steel Rebars – which currently controls a solid 65 percent of the market share – said that international indicators point towards further hikes in the price of raw billet, predicting it would exceed 40 percent this year.
However, the ongoing investigation in the steel sector raises the possibility that merchants and not producers are behind unprecedented prices hikes.
“There is a possibility merchants are keeping huge inventories, which [could imply] that producers are correct and merchants manipulate and freeze supply on the market, said Tarek Shahin, construction analyst at Beltone Financial.
“Several times last year, producers kept prices unchanged, while merchants sold at much higher prices, he added. “Producers, such as Al Ezz Steel, raise prices because international prices of raw material are escalating.. You can’t really argue it’s a criminal [act].
Recent data shows that merchants currently reach a profit margin of around LE 1,350. Prime Minister Ahmed Nazif recently told local press that domestic steel prices continue to be below the global averages, despite ongoing upsurges.
Beltone Financial cites that local rebar prices are at $770 per ton, compared to export prices above $800 per ton. “The Prime Minister s comments may quell fears that the government may impose a price cap on producers, the regional invesment bank commented.
Meanwhile, the three-year-old anti-monopoly commission is now investigating the Egyptian steel sector for monopolistic practices. Findings of investigations in the steel sector were due last December, but have been delayed since then. Fingers have pointed to Ahmed Ezz, accusing him of using his political ties to close the current investigation.
The commission declined to comment on newly announced investigations. However, Ibrahim Abdel Reheem, head of media relations at the commission, previously told Daily News Egypt that “delays in steel investigation are not due to anything other than we are not done with our research yet. We do not want to release any inaccurate information in order not to wrongfully accuse anyone.