CAIRO: The Egyptian Competition Authority (ECA) last week began investigating anti-competitive practices in Egypt’s cement industry, sources told Daily News Egypt.
The ECA said that the directive to launch the probe had come directly from Minister of Trade and Industry Rachid Mohamed Rachid.
“It was imperative for the ECA to step in and conduct a full investigation into the sector. This investigation will identify the exact reasons behind the price increases and based on the results of this investigation, we will react appropriately, Rachid said last week in a statement.
The announcement by the minister comes on the heels of steady price increases for cement despite conditions that should have instigated their decline. As a result, the minister imposed a four-month ban on cement exports in order to allow the investigation to run its course.
“We received a request from the Ministry of Trade and Industry last week to investigate the cement industry, said Ibrahim Ahmed, spokesman for the ECA. “and we began that investigation last week.
Rachid said in a statement that his ministry had taken aggressive steps to help stabilize the price of cement but that it continued to increase “for what seems like no specific reason pertaining to production or demand.
The ECA’s latest investigation marks the second time in a year that the cement industry has come under investigation for anti-competitive practices. Last year cement executives for fined by an Egyptian court for price collusion.
Ahmed explained that the investigation would be carried out under a new set of guidelines. While last year, executives faced maximum penalties of LE 20 million, new regulations mean that guilty parties can be fined up to LE 300 million.
As Daily News Egypt reported last week, the cement industry has boomed in recent months with demand up 18.8 percent in February versus the same month a year ago. This has been largely driven by a dramatic decline in steel prices which has given a boost to the construction industry.
Despite increased demand and a handful of other upward price pressures on cement, the Ministry of Trade and Industry said the steps it had taken to rein in prices should have had more of an impact. That they haven’t is the central to the ECA’s probe.
The broad-based investigation is likely to dig into drivers and metrics of the industry to see if there is a basic economic explanation for the price increases.
The ECA plans to “monitor the production and distribution patterns in all supply chains, it said in a statement. “The authority will also analyze the efficiency and flexibility of various aspects of demand, supply and prices in addition to studying the elements of the cost of production of cement, to identify any constraints or factors that may limits competition in this sector.
Analysts suggest that the export ban may not have much of an impact on the price of cement because only about 1 percent of cement produced in the country gets exported.
In the short term, though, prices did soften, falling to LE 540 per ton on the heels of the ministry’s announcement.