CAIRO: For the fourth time this year, Al-Ezz Steel Rebars upped prices an extra LE 370 per ton this week, bringing wholesale steel prices to LE 4,580 per ton and consumer prices close to LE 5,000 per ton.
Once again, officials from Egypt’s giant steel producer linked domestic upsurges in the sector to leaps in international markets and rises in prices of raw material, which “directly affect production costs.
The company said that international indicators point towards further hikes in the price of raw billet, predicting it would exceed 40 percent this year.
The firm – which currently controls a solid 65 percent of the market share – has been abruptly raising prices to unprecedented highs since January, and similar increases are expected throughout the year.
Beltone Financial expected iron ore prices to rise at least 35 percent this year and 10 percent in 2009. “As is the case with cement, steel demand is expected to grow in the double digits in 2008 on [growth in] infrastructure and real estate investment, the regional investment firm said.
“International iron ore and scrap costs, to which Al Ezz Steel Rebars is exposed, are expected to also increase significantly this year. So far, global steel giants have detailed plans to increase prices this year; and [consequently] Al Ezz Steel Rebars announced a 7 percent rise in ex-factory prices at the start of 2008 and is expected to be able to pass on further rising costs in the near term.
On the other hand, experts in the sector called market price hikes unjustified in light of rising world prices and domestic “scrap prices. “Domestic price increases are not consistent with international hikes, said Magdy Sobhy, senior economist at Al-Ahram Center for Strategic Studies. “If international prices rose, let’s say, 10 percent, domestic prices soared 20-30 percent.
He added that international price surges have “excessively been used as an excuse to raise prices on the market. “Steel prices in Egypt have been escalating for a year and a half now.
“Up till now, the real reason behind these upsurges is not clear because investigations in the case have not been finalized, he said in reference to investigations into possible antitrust and competition violations being conducted by the Antitrust and Competition Protection Commission (ACPC).
In a similar development, the government raised prices of fertilizers by approximately 90 percent to LE 1,500 per ton, up from LE 780 per ton, in order to unite domestic and international prices.
This step, stated the Ministry of Agriculture, aims to liberalize prices of agricultural inputs and outputs as well as remove market distortions created by speculative black market traders.
An official source at the Ministry of Agriculture and Land Reclamation said that the difference between a subsidized price and a market price created distortions, which led to a significant quantity of fertilizers being sold on the black market. This abused the LE 1.3 billion subsidy paid by the government on fertilizers, which traders – rather than farmers – benefit from.
“The government’s official price for fertilizers is between LE 35-38 per bag. However, there is not enough supply at this price range, and farmers have to resort to the black market where they pay LE 110-115 per bag, explained Mahmoud El-Rafey, managing director of the Egyptian International Center for Agriculture (EICA).
Producers, he added, do not want to sell fertilizers at subsidized prices, so they abstain from supplying ration shops; and therefore, drive farmers to buy fertilizers at higher prices.
The increase became effective Saturday. According to the ministry, the new price is still 40 percent below that of international markets and is aimed to increase availability of fertilizers on the local market.
While the government revealed plans last month to lift subsidies off fertilizers, it decided to raise prices at which it buys wheat from local farmers in the 2008 season to LE 320 per bushel, up from LE 220 per bushel, to encourage farmers to grow wheat.
The Ministries of Agriculture, Social Solidarity, Finance, and Trade and Industry previously agreed to establish a committee to determine purchasing prices for domestically grown crops and raise local prices to international levels.
The Ministry of Finance has secured LE 6 billion to buy the wheat at the new price.
“As part of its subsidy restructuring program and to remove distortions in the fertilizer and food products markets, the government is reducing subsidies to companies on energy and redirecting them to the low income class – the farmers, in this case, commented Beltone Financial.
Similarly, the government raised this week prices of purchasing several agricultural products from farmers to international levels, including corn, sugar beat and sugar cane by 37 percent, 14.3 percent and 12.5 percent, respectively.
