CAIRO: Egyptian steel importers have reduced their prices to as little as LE 3,100 per ton following the decision of Ezz Group, Egypt s dominant steelmaker, to lower ex-factory prices to LE 3,400 earlier this week.
Since late last year, steel importers – mostly importing from Turkey, the Ukraine and Greece – have taken advantage of Egypt s relatively high steel prices to undercut local manufacturers at a profit, said Ismail Sadek, a steel analyst at investment bank Beltone Financial.
It s simply importers seeing an opportunity, Sadek said. [Local] prices are still not in line with international prices, which are lower.
Local importers have been buying steel for between LE 3,000 and LE 3,200 per ton, said Patrick Gaffney, a steel analyst at EFG-Hermes. This would leave them little profit if they have to sell versus Ezz s LE 3,400, he said.
Al-Ezz Group, which controls over 60 percent of the Egyptian steel market, announced it would reduce its ex-factory price to LE 3,400 from LE 3,750 earlier this month. The firm s primary competitors, Beshay Steel and El-Garhi Steel, had been selling for between LE 3,700 and LE 3,600.
The consumer price for a ton of Ezz steel has since fallen to LE 3,500, though prices vary slightly depending on which governorate they are sold in, Gaffney said. LE 3,500 represents the Alexandria price, while a ton of steel costs LE 3,520 in Cairo and LE 3,550 in North Upper Egypt. In South Upper Egypt, the Sinai and the Red Sea, the price is LE 3,575, Gaffney said.
Because Ezz uses both of the two major methods for producing steel – the Direct Reduced Iron (DRI) method and another involving scrap metal – the firm is able to make steel at a lower cost than most Egyptian manufacturers, Sadek said. Scrap metal prices fluctuate throughout the year, while iron ore is revalued annually, he said.
More steel imports, reportedly purchased for LE 2,800 per ton, will arrive from Turkey in February, according to local media.
Cheap imports are probably the main reason that steel producers continue to lower prices, said Gaffney. If importers are able to buy steel at LE 2,800 and take a small profit, then they would undercut local producers and potentially drive prices down again in March.
Local steel producers have recently accused Egyptian importers of dumping, a process by which steel is sold abroad at a price lower than in the exporter s home market. Local press quoted Rafiq El-Daw, vice president of Egypt National Steel, as saying that Turkish steel is selling for $600 in Turkey but only $500 in Egypt, thereby suggesting that local importers are dumping.
Sadek, however, said he doesn t believe such claims are solid. An importer wants to make a profit from what he imports, he said.
El-Daw and other representatives of the local market have also called on the government to intervene and protect local industry. But how are they supposed to intervene? Sadek said. Ensuring that the local construction industry is able to buy steel at a competitive price is also important, he said.