The Egypt steel sector have been subjected to legal battle between integrated steel players and hot rolled steel manufacturers since the beginning of this year after the Ministry of Trade and Industry imposed a temporary import tariff of 15% on iron billets and 25% on steel rebar in April set for 180 days ending in October.
However, in Jul’19 Egypt’s administrative court has overturned a decision by the Ministry of Trade and Industry to impose tariffs on imported billets and rebar.
The Egyptian rolling mills appealed the decision on grounds that it as based on erroneous data pertaining to the magnitude of steel billet imports. The administrative court in July subsequently ruled in their favor, revoking the ministry’s earlier decision. The ministry then appealed the decision in the same month which was also rejected by the administrative court in favour of rolling mills. Subsequently the ministry has filed another appeal with the Higher Administrative court, which after a number of reschedules, is due on 5 Oct’19.
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. 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.
Plunging prices
The domestic steel demand seems to be deteriorating in Egypt that can be assessed from falling cement demand figures (5%-7% down year-to-date), which are highly correlated to steel demand. Subsequently, 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.
Ezz Sateel lowered its rebar prices to EGP 11,290/MT (USD 693/MT) ex-works from EGP 11,890/MT (USD 730/MT). Elmarakby also lowered its rebar price to EGP 10,800/MT (USD 663/MT) from EGP 11,500/MT (USD 706/MT) due to slow market conditions.
The contrasting views
The industry participants (rolling mills) have pointed out that the decision to impose temporary or permanent protection fees on the imports of billet creates a kind of monopolistic practices especially by integrated steel manufacturers, which allows them to control iron prices in the market.
Whereas the integrated steel manufacturers are of the opinion that the local mills can’t compete in the local market without fair conditions with imports. There are challenges with imports coming into Egypt. Production costs in the country are very high so it’s tough to compete with the cheap imports. The mills cannot continue billet production without fair conditions through applying proper safeguards duty which means huge investments are in stake.
The market experts believe that the government is in a tough situation in terms of trade policy, and are 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. Meanwhile, as the ministry is expected to implement definitive safeguards, local steel market is in a limbo while demand deteriorates.
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