Steel prices tower above LE 7,000 a ton

Alex Dziadosz
4 Min Read

CAIRO: A series of leaps brought steel prices to nearly LE 7,800 per ton over the past few days, with market chatter suggesting they could clamber as high as LE 10,000 in the coming months.

Recently, irritated consumers staged a protest at an Al Ezz Steel Rebars warehouse in Qalyubia, accusing steel merchants of hoarding to jack prices even higher and producers of only selling to middlemen, the local press reported.

Daily News Egypt calls to Al Ezz Steel headquarters went unanswered yesterday.

If the steel supply has been restricted, companies like Al Ezz Steel are probably not to blame, said Beltone Financial analyst Tarek Shahin. “Steel merchants – the ones buying from the companies – are traditionally the ones who hold back the supply, he said.

Historically, this is not unusual. “It’s happened many times, Shahin said. A few months ago, the state hinted that steel merchants should be more closely regulated because of the likelihood of hoarding.

The fact that the end price of steel has fluctuated faster than the “ex-factory price, the price when it is bought from the factory, suggests middlemen may be holding back supply, Shahin said.

While all steel prices have been climbing faster than usual – Al Ezz Steel prices rose nearly every month this year, as opposed to in 2007, when they rose only once – consumer prices have been rising even faster, on a weekly or, sometimes, daily basis.

“On the company side, it’s increasing on a more controlled basis, Shahin said.

Local papers quoted Assistant Minister of Industry and Trade Hisham Ragab as saying that steel production rose by 2, 500 tons last week, reaching 109.8 thousand tons overall, and that dealers received 136.4 thousand tons last week, up from 88.3 thousand tons the week before.

Global spikes in input costs such as iron ore, scrap metal, billets and coal have combined to press steel prices to abnormal heights this year. Some mining companies, anticipating massive demand from India, China and other developing markets, have been able to hike prices even further, Shahin said. While the price hikes announced by parliament on May 5 have stirred a number of inflation worries, Shahin said they probably did little to change steel prices as companies try to anticipate input cost rises and hedge against them. As the global prices have been rising for some time and the government has made no secret of its intention to strip energy subsidies, the increases were likely passed along preemptively.

Construction here has become 27 percent pricier since January, according to an HC Securities report published this year. But Shahin of Beltone said homebuilders are often able to deal with these costs. “Most projects are able to pass on subsequent price increases on to the end consumers, he said.

In response to high prices, the state banned steel exports starting in late March.

Global steel prices are expected to swell for some time. One reason for this is that the iron mining industry is largely consolidated into three major players – CVRD, Broken Hill Proprietary and Rio Tinto – meaning each firm wields considerable bargaining power. And with Broken Hill and Rio Tinto entering merger talks last November, it could get even tighter.

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