CAIRO: Local steel companies cut their prices by between LE 300 and LE 550 per ton this week in response to tumbling global prices and the continuing threat of Turkish and Ukrainian imports.
Al Ezz Steel, the country’s dominant steelmaker, lowered their ex-factory price to LE 3,050 per ton from LE 3,400 per ton. Following suit, Beshay Steel, a smaller producer, cut their ex-factory price to LE 3,000 from LE 3,500.
Local ex-factory prices reached as high as LE 7,450 last summer, with consumers paying as much as LE 7,750. As the economic downturn has spread and intensified, however, global commodity prices have sunk as the appetite for construction materials has dissipated. In Turkey, a ton of steel is reportedly selling for as little as $460 (LE 2,584).
But the cost of steel in Egypt has remained above the average abroad, presenting an opportunity for other steel-producing countries – primarily Turkey and the Ukraine – to export to Egypt.
“Imports into Egypt are still a threat to Egyptian producers, said Ismail Sadek, a construction analyst at investment bank Beltone Financial. “He [Ahmed Ezz] wants to counter the threat posed by the price differential. He has no choice but to lower prices.
Prices here are higher for a number of reasons. One is that the local construction industry is relatively healthy. While booms have ended dramatically in Dubai and other regional markets, building has continued here at a relatively stable pace, buoying prices and spurring former suppliers for the United Arab Emirates, for instance, to turn towards Egypt.
Another is that prices here are largely dictated by Al Ezz Steel, which controls well over half the local market. Egyptian steelmakers announce their prices near the start of each month, with most companies following Al Ezz’s lead, and so there is generally a lag between falls in global prices and the response here.
“We are having a reactive response rather than a proactive one, Sadek said.
The recent depreciation of the Turkish and Russian currencies has also made it cheaper for steelmakers there to produce, Sadek said. While the Egyptian currency has also fallen, it has not taken quite the blow that the ruble and lira have.
Dropping transport costs, due again to the economic slowdown, have made it less costly for these producers to send their steel overseas.
All this has cut into local producers’ profits, inspiring some anger. Two factories are now considering halting production in order to pressure the state to put tariffs on Turkish steel imports, according to Al-Masry Al-Youm, a local newspaper.
But Sadek thinks it is unlikely that the government will impose any new tariffs. “You have to have a very strong dumping case, he said. “Dumping by definition is when you sell in the export market for a lower price than in your local market. Rather, he said, the advantage of foreign companies most likely lies in their lower production costs.costs.