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Al-Ahram Weekly 29 July - 4 August 1999 Issue No. 440 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 29 July - 4 August 1999 Issue No. 440
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Profile Travel Living Sports Time Out Chronicles People Cartoons Letters Dumping steel
By Gamal Essam El-DinThe Ministry of Trade was showered in the past month with complaints from local steel producers confronted with a flood of low-priced products from Turkey, Libya, Saudi Arabia and some of the countries of the former Soviet Union.
The Ministry's Anti-Dumping Office (ADO) is currently busy probing the numerous complaints charging that huge quantities of cheap and subsidised steel products have been brought into the country. The Alexandria National Iron and Steel Company at Dekheila, Ezz Steel Rebars and Helwan Iron and Steel Company have submitted complaints claiming that two-and-a-half million tons of cheap foreign steel products have found their way into Egypt over the last year, mainly from Russia and Kazakhstan. The previous year 2.2 million tons of steel were imported, the Egyptian companies said.
"The total quantity currently available in the local market stands at 3.6 million tons of iron and steel products, excluding reinforced steel, while local demand stands at 2.6 million. This means that the excess supply currently in the market is about one million tons," said Adel Al-Danaf, chairman of the Holding Company for Metal Industries.
In terms of reinforced steel, the local steel producers argued that while the local productive capacity currently stands at 4.5 million tons yearly, local consumption does not exceed 3.5 million tons. Thus, there is excess local production estimated at one million tons yearly, and yet more than 700,000 tons of foreign reinforced steel products have been imported into the market, Egyptian producers said.
The complaints voiced by local iron and steel mills go back to June last year when they charged that several thousand tons of reinforced steel were imported, mainly from the Ukraine. After the issue of steel imports was raised in parliament, the Ministry of Trade rushed to slap compensatory duties, ranging from six per cent to 40 per cent, on steel imports from the Ukraine. Al-Danaf said that although this punitive measure led to a sharp decline in Ukrainian steel imports, the market was flooded again this year with huge quantities from the countries of the former Soviet Union, especially Russia and Kazakhstan.
In reaction to this new wave of dumping practices, early this month local steel manufacturers submitted a request to Prime Minister Kamal El-Ganzouri asking that steel imports be banned for at least one year. They argued that two projects by the Al-Dekheila and Ezz companies for the production of steel rebars are designed to go into operation in the next two years to cover local needs. "These two projects together are expected to produce 2.4 million tons of steel rebars. This, added to current local production of 600,000 tons, will raise the total to three million tons per year. Since local consumption will not exceed 1.8 million tons over the next two years, this means the local market will suffer from an excess of 1.2 million tons," the steel manufacturers told El-Ganzouri.
Most of the complaints also charge that there was excessive dumping in the local market of cheap steel products from Turkey, Libya and Saudi Arabia. The Egyptian manufacturers pointed out that reinforced steel products from Turkey are sold at reduced prices ranging from LE590 to LE1,050 per ton at the Port of Alexandria while the price of locally produced reinforced steel ranges from LE1,270 to LE1,320. The complaints assert that the amounts of low-cost imported reinforced steel from Turkey, Libya and Saudi Arabia now in Egypt have reached 116,000, 70,000 and 360,000 tons respectively.
Helwan Iron and Steel Company (HISC) has been the hardest hit by dumping practices. Chairman Ali Helmi said that the cheap and subsidised imports of steel products into Egypt over the last two years are mainly responsible for a decline of at least 40 per cent in the volume of sales since mid-1998. "This has led to a drop of LE300 million in revenues in the past year, while the volume of unsold inventory has climbed to 260,000 tons. Even worse, the company failed last year to export 200,000 tons of steel products, valued at approximately LE200 million, while domestic sales dropped from 1.1 million to 650,000 tons per year," said Helmi. He also said that HISC is saddled with a staggering debt of LE3 billion and an annual interest rate payment of LE350 million.
Another reason for the decline in HISC's productive and competitive capacities is the rising cost of production inputs, Helmi explained. The company pays market prices for electricity, coke, water and railway transport, he said. For example, HISC pays LE450 per ton for local coke while the price of the imported ton is a mere LE300, he added.
Amin Mubarak, chairman of the Industrial Committee of the People's Assembly, commented that the collapse in the value of currencies in the countries of the former Soviet Union and the recent dramatic financial collapse in Southeast Asia are still having a negative impact on local steel manufacturers. "There is no denying that the severe collapse in the local currencies of these countries has brought the prices of their products, especially steel and textile goods, to unprecedened lows. This came at the expense of the local production of most Third World countries, primarily Egypt," Mubarak told Al-Ahram Weekly.
However, he stressed that Egypt is currently witnessing a boom in construction and industrial projects. This includes the mega-development projects in Toshka, Sinai, east of Port Said and west of Suez. "All of these projects are sure to guarantee high domestic demand for steel and iron products for the next 15 years. For this reason, local production will have to be supplemented with foreign imports," said Mubarak.
A study conducted by the Specialised National Councils has estimated that the giant infrastructure projects planned in Egypt will result in a demand for steel products that will reach 8.56 million tons annually by 2005.
