Egypt’s Ministry of Trade and Industry recently revoked the 25% and 16% safeguard duties on imports of rebar and billets respectively. The move comes earlier than scheduled. It had been imposed in Apr’19 and was to lapse in Apr’22.
Once the safeguard is lifted, imports of both materials are expected to increase.
Local rebar prices are currently at around 15,000/t Egyptian pounds (EGP), which is around $950/t plus 14% VAT. Ex-mill prices are at $835/t.
As on 31 Oct’21, domestic billet prices, ex-mill and including VAT, were at $793/t, as per a source in Egypt.
Before removal of safeguard, 20% of billets demand was met through imports, the source informed.
Why were the safeguard duties lifted early?
Market sources indicated to SteelMint that gas supply, which is tight globally at present, is also having an impact on Egypt’s power sector. The supply crunch has led to gas prices rising. This, in turn, has pulled up power tariffs, increasing the cost of steel production.
Therefore, rather than melting scrap, buying semi-finished (billets) and rolling these into rebar would be more cost effective, said a source, adding, “This will ensure that steel supply will not get impacted. If mills have to recover their power costs, then steel prices will have to be hiked and which may affect demand. The government perhaps does not want demand and supply to be impacted.”
Operation cost varies between $50-80/t, depending on the technology applied, said a source.
Impact
Around 3 million tonnes (mn t) of steel billets and 7 mn t of steel rebar are required per annum in Egypt. There is more than 10 mn t of domestic rebar capacity, a source informed.
Since the move was announced, Egyptian re-rollers have started enquiring with regional merchant billet suppliers about possible purchases, sources informed, adding that this should support prices.
It is heard that post-removal of the said safeguard duties, billet imports will become tax-exempt but rebar will still attract a Customs duty.
Outlook
After removing the safeguards, the imported billets volume could exceed 2 mn t per annum, a source informed, adding that there is no definite volume for imported steel rebar but it will not be less than 1 mntpa.
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