Egypt Producers Hike Domestic Rebar Offers post Safeguard Duty Imposition on Steel

In April 2019, Egypt imposed a ‘temporary protection fees’ of 25% on steel rebar and 15% on iron billet imports for the period of 180 days with an intention to protect domestic steel industry from the unfair competition of foreign products.

Following this, the steel mills in the country have increased their domestic rebar offers. The largest steelmaker in the country, Ezz Steel raised its rebar price to the domestic market by EGP 180/MT (USD 10.50) to EGP 11,780/MT ex-works inclusive of 14% value-added tax (VAT).

Another steel maker Suez Steel lifted its offers by EGP 250/MT to EGP 11,750/MT ex-works, while Beshay and Egyptian Steel raised their prices by EGP 160/MT and EGP 200/MT, to EGP 11,760/MT and EGP 11,750/MT ex-works, respectively.

The integrated steel players at an advantage

Those re-rollers that have their in-house billet production are more at an advantage to increase their rebar prices and improve on their profits as compared to those that are dependent upon imported billet because of the safeguard duties.

However, the recent CIS billet offers to Egypt are around USD 445/MT CFR, but the scope for imports post safeguard duty imposition has become quite limited. Taking into account the 15% safeguard duty and other associated costs, imported billet would reach Egyptian re-rollers at around USD 515/MT. And factoring in the relatively higher cost of rebar production in the country, re-rollers’ break-even point for rebar would be around USD 585/MT.

The domestic billet offers from mills to local re-rollers are in the EGP 10,300–10,600/MT (USD 600-618) ex-works range this week which means that importing billet is still a lucrative offer for re-rollers compared to procuring it from the domestic market despite depressed margins.

The independent re-rollers are finding it increasingly difficult to operate if the government does not make any amendments to the safeguard measures, which could lead to shutdowns, market participants said. On top of this, lacklustre steel demand in the country is also likely to pressure rolling mills. Market participants expect demand to remain “moderate” through Ramadan and the rest of the summer months.