Protect Egypt's steel
The industry is anxious about a low-priced Chinese shipment on its way to Egypt, reports Ahmed Kotb
Last week news spread rapidly about an awaited shipment of 30,000 tonnes of Chinese steel that will be sold in the local market at around LE3,600 per tonne, LE1,000 less than the average price of a tonne of Egyptian steel.
The news of the shipment, even before its arrival, already affected the sales of many local companies, because everyone is delaying their purchase and waiting for the cheaper Chinese steel.
"Once the Chinese metal hits the Egyptian market, the local industry will come to a standstill," said Mohamed Hanafi, general manager of the Chamber of Metal Industries at the Industrial Development Authority (IDA). "Factories will shut down immediately and the jobs of more than 150,000 Egyptian workers will be in jeopardy."
According to Hanafi, many Egyptian steel factories cancelled raw iron orders fearing that they would not be able to sell their products or compete with the much cheaper Chinese metal.
A recently published news reports by Reuters stated that Chinese producers had to sell their steel products at below usual prices because they want to repay their loans to banks as soon as possible before they are embroiled in lawsuits. "That's why they started to look for new markets, including Egypt, especially that countries like Turkey, Indonesia and the US, impose a $100 tax on every tonne of Chinese steel sold on their territories," Hanafi pointed out.
Khaled Al-Boreini, chairman of the board of Elco Steel Company, says the import of cheap steel from China will destroy the national industry. "The first to feel the pinch are the smaller companies," he said, adding that the competition is unfair, especially that the Chinese government currently gives steel exporters an 18 per cent subsidy.
Al-Boreini noted that the quality of the Chinese metal complies with international standards, thus traders and consumers will find it attractive.
"Egyptian factories already have stockpiles of steel surplus because they produce more than the local market's demand. Now there will be more surplus," Al-Boreini said.
Egypt's production capacity of steel amounts to more than nine million tonnes per year, while the local market consumes around six million tonnes. Despite that fact, Egypt still imports steel, mainly from Turkey, but this is believed to benefit the consumer because of competitive Turkish prices.
Planning in the steel industry, according to Al-Boreini, is not adequate. "How can we produce more than the market needs and end up having unneeded surplus?" he wonders. "That's one reason why many national producers suffer losses most of the time."
On the other hand, consumers and traders are happy because of the cheaper steel. For Ahmed Al-Zeini, head of the building materials division at Cairo Chamber of Commerce, importing cheaper steel helps fight monopoly in the market and is in the benefit of the consumer.
"Egyptian steel producers should lower the prices at which they sell their products because they are overpriced," he said.
The cost of steel production in Egypt is lower than that of Turkey, yet the latter's products are cheaper, Al-Zeini stated.
Despite the obvious benefit to the consumer, calls for preserving the national steel industry and protecting it from unfair Chinese competition are increasing.
Local steel producers requested that anti-dumping duties be imposed on the Chinese shipments, which are yet to arrive to Egypt's harbours; some even requested a ban on steel imports from China.
Al-Boreini called for the establishment of a higher council for steel and construction materials, gathering all producers and placed under governmental supervision. "This council's duty should be to ensure the setting of suitable prices for both producers and consumers," he stated.
For now, Minister of Foreign Trade and Industry Hatem Saleh is studying the petitions and suggestions presented to him by local steel producers. He is yet to make a decision on the matter.