CAIRO: Whether it’s due to an upsurge in demand or a general strike by truck drivers, current cement price hikes on the domestic market are unjustified, said industry insiders.
At the start of this week, cement prices reportedly ranged between LE 610 and LE 700 per ton on the domestic market, which compares to an average of LE 450 per ton for ex-factory prices.
“This price increase is unjustified. It is a manipulation of prices exercised by retailers, said Ibrahim Mahlab, executive at Arab Contractors Company.
“Claiming it’s due to supply-demand factors is unfounded.
On Sunday, local press reported that Egypt’s Ministry of Trade would issue a decree to monitor local cement prices and control profit margins of retailers and distributors, saying the ministry described recent price hikes as unjustified.
According to some reports, the ministry is mulling over imposing an export tariff or another export ban to lower prices on the local market. Ministry officials contacted by the Daily News Egypt could not confirm that by press time.
“Retailers want to illegally increase their profit margins after prices of steel went down, Mahlab pointed out. “They are maneuvering prices.and the government [would] signal a strong warning to those retailers.
Omar Mohanna, chairman of Suez Cement, agreed: “Traders and distributors are maneuvering the market, which is totally unjustified.
“Cement producers and the government have to jointly cooperate to stop traders from market manipulation, he added.
However, one industry analyst said that it might be more difficult for the government to monitor cement market prices than those of steel.
“Number of cement producers in Egypt is bigger than steel producers, which means that number of intermediaries and middle-men is also bigger.
So, it is difficult to control it and monitor the market through retailers and distributors, said Ismail Sadek, construction analyst at Beltone Financial.
Mohanna said that Suez Cement is addressing market manipulation. The company – which is comprised of Suez Cement, Helwan Cement and Tourah Portland Cement companies – has kept its prices unchanged since August.
“Our ex-factory cement price is stable at LE 450 per ton. We also have a low-cost delivery price at LE 475 per ton, whereby the company itself handles transportation and delivery of cement to [retailers].
“We are also working on increasing our share of low-cost delivery and maintaining prices stable at LE 475 per ton, he added.
Suez Cement currently delivers 15 percent of its total cement production.
The company – which holds 30 percent of market share in Egypt – produces 11.5 million tons per year that are entirely sold in the domestic market.
Sadek underlined an additional factor that led to recent cement price hikes.
“In the past few days, a general strike by truck drivers has taken place across a number of governorates protesting against the law that bans use of trailers, which increased transportation costs.
“Cement retailers seized this opportunity to push prices up to an unjustified level, which is something we are used to from these retailers, he clarified.
“Traders took advantage of this strike as well as of a robust demand in construction material to raise cement prices.
Cement and steel are one of Egypt’s most controversial construction-related sectors and have recently been making headlines across Egyptian local press on suspicion of price fixing and monopolistic practices.
In July 2006, Egypt’s trade ministry asked the country’s competition watchdog to investigate price practices in the cement and steel markets.
In August 2008 – following a 14-month probe into the cement sector – a Cairo court fined 20 cement industry executives LE 10 million each for violations of the monopolies law and price fixing.
The trial, which began in February 2008, was the first of its kind under an anti-monopolies law passed four years ago to bring Egyptian law into line with international practices. Appeals from company executives are still pending.