Wednesday,26 September, 2018
Current issue | Issue 1243, (23 - 29 April 2015)
Wednesday,26 September, 2018
Issue 1243, (23 - 29 April 2015)

Ahram Weekly

Tariffs on steel and sugar

New anti-dumping tariffs on imported steel and sugar are stirring controversy, reports Ahmed Kotb

Al-Ahram Weekly

Reactions varied to the Ministry of Trade and Industry’s decision on Sunday to impose an eight per cent tariff on each ton of imported steel rebars for three years, in addition to a 20 per cent import tariff on white sugar for 200 days, starting from the beginning of May.

According to the decision, taken after investigations into a surge of imports throughout 2014 and in the first quarter of this year, a minimum of LE408 will be paid per ton of imported steel during the first year, dropping to LE325 in the second year and LE175 in the third.

White sugar imports will be subject to a minimum tariff of LE700 per ton for 200 days.

The move extends earlier temporary anti-dumping tariffs on steel announced in October 2014, which then imposed a minimum of LE290 per ton for a maximum period of 200 days. The latter decision apparently was not enough to control the flow of imported steel into the Egyptian market.

Producers say the decision is meant to protect the national industry, while others are worried that it will not benefit the consumer because the lack of competition from imports will lead to price increases for domestic products.

Minister of Trade and Industry Mounir Fakhri Abdel-Nour said in a press statement that the decision was taken following complaints filed by the Chamber of Metallurgical Industries, which represents domestic steel producers, at the Industrial Development Authority (IDA), regarding their losses as a result of dumping on the local market of imported steel, especially from China and Turkey.

He said that the World Trade Organisation (WTO) was notified last week of the procedures that would be taken to protect domestic production of steel and white sugar. The WTO allows temporary tariffs to be imposed on imported commodities in case a surge of imports happens in a way that damages local production.

Mohamed Hanafi, head of the Chamber of Metallurgical Industries at the IDA, said that losses to domestic producers as a result of dumping on the market of imported steel amounted to about LE700 million during 2014.

“Several countries protect their national industries with similar decisions,” he said, adding that Turkey and Malaysia impose safeguard tariffs that can reach up to 22 per cent on steel imports, and China does the same with a 15 per cent tariff. “Every country should protect itself from harmful practices like dumping,” he stressed.

About 1.1 million tons of steel from China, Turkey and Ukraine entered the Egyptian market in 2014, according to the Chamber of Metallurgical Industries. Local steel production reached about eight million tons last year, with approximately seven million of those sold to consumers.

“More than one million tons of locally produced steel are still in stock as a result of dumping the market with low-priced imported steel,” Hanafi said. The ministry’s decision is expected to lead to increasing production at domestic steel factories.

A ton of domestic steel currently costs an average of LE5,000, while Turkish and Ukranian steel costs LE200-LE300 less. Chinese steel, a nightmare to local producers because of its cheap price, is sold at under LE4,000 per ton and is witnessing a steady rise in demand. The exact quantity of Chinese steel imports into Egypt is not available.

Hanafi argued that the Chinese steel is low in quality and does not meet Egyptian quality specifications. He also said that Chinese steel benefited from export subsidies of 18 per cent per ton, which explained the much lower price on the local market.

However, Ahmed Al-Zeini, head of the Building Materials Division at the Cairo Chamber of Commerce, criticised the new anti-dumping tariff which he believes only favours producers. “The prices of local steel will increase because of the absence of competition, and consumers will be obliged to pay the difference,” he said.

Al-Zeini expects an approximately LE300 rise in costs per ton next month on the back of the new import tariffs, leading to price hikes in real estate prices.

Abdel-Nour said on Sunday that local steel prices would not witness any increase as a result of imposing anti-dumping tariffs on imports, but Al-Zeini’s concerns stem from similar previous cases when local producers raised steel prices gradually following temporary anti-dumping tariffs imposed by the government on imports.

The same argument is true for white sugar. Businessman Naguib Sawiris said in a television interview on Monday that imposing an anti-dumping tariff on white sugar imports would protect a domestic industry that employs 150,000 workers as well as about 600,000 Egyptian farmers who provide local factories with the sugar beet and sugarcane needed to produce white sugar.

Sawiris, who owns a sugar factory, added that several producers had seriously considered shutting down their factories by the end of the current season because of losses and would have done so “if it had not been for the ministry’s decision.” He promised not to increase the prices of his products after the decision was taken. A kg of locally produced white sugar costs between LE5.5 and LE7.5 depending on quality.

However, traders believe that white sugar prices are likely to increase. “Imported white sugar is LE1 cheaper than locally produced sugar,” said Ahmed Yehia, head of the Foodstuffs Division at the Cairo Chamber of Commerce.

He said that Egyptian producers argue that the cost of producing white sugar in Egypt is more than that for imported sugar, and that importing white sugar will not be cost effective after the new tariff.

While current local production of white sugar only covers two-thirds of consumption needs with two million tons annually, Yehia believes the government will eventually step in and import the quantities needed by the local market once demand exceeds the domestic supply.

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