With an eye on prices, trade ministry to ban rice and cement exports

Alex Dziadosz
5 Min Read

CAIRO: Spurred by the steady ascent of cement and rice prices here over the past months, the Ministry of Trade and Industry announced it would ban exports of both goods late last week, hoping to staunch further increases and avert the troubles that long-term instability in either commodity’s price could provoke.

The ban on rice exports is scheduled to last through September, according to a trade ministry statement. The cement ban, which applies to grey cement and clinker, will also last through September. Egypt blocked rice exports in January, but approved the export of 485,000 tons less than a month later.

Over the past few months the coupling of inflation and greater domestic consumption has propelled the growth rate of grain and bread prices from 15.3 percent to 26.5 percent. News reports have shown dairy prices rising 20 percent over the same period.

Egypt’s dilemma comes in the midst of a wider shortage sparked by pervasive draughts and a growing taste for biofuels, culminating in a situation characterized by a World Food Program officer as a “perfect storm, according to the Los Angeles Times.

Stable food prices are of obvious importance for domestic stability, a fact reinforced recently by widespread strikes among doctors and teachers and mounting violence along subsidized bread queues, which caused at least seven deaths last week. In 1977, riots following a spike in the price of subsidized foods killed nearly 70 people.

Egypt grows around 4.6 million tons of rice annually and consumes around 3.2 million, with the remainder generally exported.

Cement, while a less basic staple, is among the most important catalysts of growth in the real estate industry, vital to housing and employing an expanding population. Sustained price increases in key building materials could dampen overall economic growth.

“[The government] knows that the real estate sector is important, said Nemat-Allah Choukri, a senior analyst at HC Brokerage. “If this sector slows down, the whole economy will suffer.

The third quarter of any year generally sees a rise in cement prices, Choukri said, as summer construction gets underway.

A report from the investment consultancy Beltone predicted the cement ban would slow the rise in cement prices, but will not lead to overall lower prices. “At the height of the summer demand, there will be a need for the product, and importing it will still not be an option, the report read. Though Egyptian prices are high, they are still lower than the regional average, the report noted. “It is the reason why we have always argued that cement exports were, broadly speaking for most producers, mainly the excess and not at the expense of the local market.

These setbacks join a cluster of recent difficulties facing the Egyptian cement sector, including a simmering antitrust lawsuit that could result in fines for many of the industry’s largest players.

Representatives from Misr Beni Suef Cement and Suez Cement, two of Egypt’s largest cement exporters, didn’t answer back questions sent by Daily News Egypt.

Many cement firms seem to have anticipated the ban to at least some degree, shifting their sights to the local market.

Misr Beni Suef exported nearly half of what it produced in 2007, but had dropped this ratio to about a third in the fourth quarter. Likewise, Sinai Cement exported 20.8 percent of its cement overall, but only 10.4 percent in the fourth quarter.

Often precipitous inflation rates have inclined the state to take action aimed at maintaining stability rather than fostering growth. The consumer price index, a standard gauge of inflation, soared from 6.9 percent to 12.1 percent between December 2007 and February 2008. The central bank responded by raising overnight deposit and lending rates to 9.5 and 11.5 percent late last month despite escalating concerns that recession in the United States and Europe could hamper domestic growth.

Choukri said that firms are unlikely to increase cement prices following the most recent government action. This is because the state can still impose its will through other avenues, such as revising the prices of raw materials, she said.

“The government still has tools. [Cement firms] will try not to upset the government in the coming period.

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