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Egyptian steel demand, prices wane amid tariffs, legal uncertainties

  • Author
  • Rabia Arif
  • Editor
  • James Leech
  • Commodity
  • Metals

London — Local Egyptian steel demand and prices have been deteriorating as the market waits for definitive tariffs to protect their local billets and rebar industry, market sources said this week.

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Major Egyptian long-product steelmakers have slashed product prices this week amid uncertainties, lower demand and higher pressure from imports, which had already been pushing prices down.

Ezzsteel lowered its rebar and wire rod prices to Egyptian Pounds 11,290/mt ($693/mt) ex-works and Egyptian Pounds 10,800/mt ($663/mt) ex-works, respectively, from Egyptian Pounds 11,890/mt ($730/mt) for both products. Elmarakby also lowered its rebar price to Egyptian Pounds 10,800/mt ($663/mt) from Egyptian Pounds 11,500/mt ($706/mt) due to slow market conditions, Platts learned.

The Egyptian Ministry of Industry and Foreign Trade has filed another appeal with the Higher Administrative court, which after a number of reschedules, is due on October 5, regarding its April 15 decision to announce temporary tariffs to protect its local billets and rebar industry against imports. The tariffs, which were set for 180 days and could be extended, amounted to 15% on billet and 25% on rebar.

Rolling mills appealed the decision on grounds that it was based on erroneous data pertaining to the magnitude of steel billet imports. A court in July ruled in their favor, revoking the ministry's earlier decision. The ministry appealedthe decision in the same month which was also rejected by the administrative court in favor of rolling mills.

"The situation carries a lot of ambiguity," Ahmed Soliman, a senior analyst with CI Capital told S&P Global Platts. "We believe the government is in a tough situation in terms of trade policy, unable to simultaneously support both integrated steel producers and rolling millers without bearing a hefty cost. It remains unclear what will happen next if the government's protectionism policy is faced with adverse legal ruling," he added.

"Domestic steel demand seems to be deteriorating - this is a read across from cement demand figures (5%-7% down year-to-date), which are highly correlated to steel demand," Soliman said.

"Local mills can't compete in the local market without fair conditions with imports, we exported billets before but competing in export markets now might not be possible," Ramy Saleh, chief business development officer at Elmarakby Steel, told Platts.

"There are challenges with imports coming into Egypt. Production costs in Egypt are very high so it's tough to compete. If you look at imports, prices range from $370-$375/mt CFR for billets, mainly from CIS. Turkey is also becoming more active, as their local mills had increased billet exports substantially in 2019," Saleh said, adding: "Latest import prices range from $400/mt to $370/mt but no new deals were heard."

The advisory committee to the minister of trade and industry has come up with two proposals for future safeguards. Under the first proposal, the ministry will impose 7% tariffs on steel billets during the first year, 5% during the second and 3% during the third year. Under the second proposal, the ministry will impose 15% tariffs during the first year, 13% during the second and 10% during the third year, on steel billets, Platts learned.

Meanwhile, there is only one suggested proposal for rebar. The proposal suggests 25% tariffs during the first year, 22% during the second and 19% during the third year. The minister can chose any of these proposals or impose different tariffs altogether. The decision is expected by October 15.

"There is a possibility that the ministry will reduce tariffs on billets and steel imports while in tandem support integrated steel producers through cheaper natural gas. But nothing is clear yet. Let's see what happens," said Soliman.

"The mills cannot continue billets production without fair conditions through applying proper safeguards duty which means huge investments are in stake. And now it's not even a question of whether safeguards should be in place or no, but the level of tariffs. Even 15% might not be enough. With current import offers at and below $400/mt CFR level, we might need something like 25% to compete fairly," said Saleh.

Currently, local Egyptian rolling mills have a total production capacity of 15 million mt. Meanwhile, local mills have stock levels of approximately two months' production capacity, sources told Platts.

Market sources are unsure about the ruling which has been delayed every month since the administrative court rejectedthe ministry's appeal. Meanwhile, as the ministry is expected to implement definitive safeguards, local steel market is ina limbo while demand deteriorates.

-- Rabia Arif, rabia.arif@spglobal.com

-- Edited by James Leech, james.leech@spglobal.com