Thursday,18 January, 2018
Current issue | Issue 1374, (21 December 2017 - 3 January 2018)
Thursday,18 January, 2018
Issue 1374, (21 December 2017 - 3 January 2018)

Ahram Weekly

Muddling by on thin margins

Exporters and importers were among the most affected by the decision to float the Egyptian pound. Beesan Kassab interviews two businessmen who benefited or suffered from the floatation  

Importers & Exporters
Importers & Exporters

This year was a difficult one for the Arab Company for Import and Export (ACIE). The company imported fewer than 3,000 tons of goods, half the amount in 2016, and all during the first six months of 2017, Ahmed Al-Zeini, CEO of ACIE and head of the building materials division at the Federation of Chambers of Commerce, told Al-Ahram Weekly.

Al-Zeini explained this was the result of “the repercussions of the Ministry of Trade and Industry’s June decision to add dumping fees to steel imported from China, Turkey and the Ukraine for a period of four months. The decision was renewed in September for two months. In December, the ministry issued a decision to apply dumping fees of 29 per cent on steel imported from China, seven to 22.8 per cent on that from Turkey, and 17.2 to 27 per cent on steel from the Ukraine. The decision is effective for five years.”

The decision paralysed buying and selling. “It was impossible to decrease our already very small margin of profit, a maximum of one per cent on each ton, to lure more buyers. The dumping fees for a ton of steel stood at LE1,000 to LE1,500,” Al-Zeini said.

For the company, the ministry’s decision was almost the last straw after the hike in prices caused by the floatation of the Egyptian pound in November 2016, also resulting in an upsurge in import costs. “The cost of importing 1,000 tons of steel increased from LE4 million to LE11 million in one go, increasing in turn the amount of value-added tax [VAT] paid for each ton. That’s not to mention the four per cent increase in the original 10 per cent sales tax, which became 14 per cent in the form of VAT,” he added.

While the floatation of the pound led to more hard currency at the banks, making it easier to buy dollars, and it was accompanied by decrees aimed at eliminating procedures previously deemed as obstacles, “despite its availability, the dollar has still become very expensive to buy,” he said.

Al-Zeini said that “extending dumping fees on imported steel for five years encourages local companies to increase their prices without good reason, especially since most production inputs are locally produced. This should have shielded the steel industry from changes in the exchange rates. The decision works in favour of local industry, but it is very damaging to the end consumer.” 

He added that the decision had been made without deliberating with the building materials division at the Federation of Chambers of Commerce.

The Ministry of Trade and Industry said the decision to impose dumping fees was a consequence of financial damage incurred by the local steel industry as a result of excessive imports from China, Turkey and the Ukraine. Before the floatation, steel prices saw a 23 per cent hike when compared to 2015 levels.

The dumping fees led Al-Zeini to stop selling steel to his customers with payment facilities like collecting the cost in instalments. “The cost has become more than we can bear,” he commented. Added to this was the increase in cement prices from LE500 to LE900 per ton in one year, which had led to obstructions in the sales of building materials in general, which now depend primarily on orders from state projects, he said.

“Previously, I used to buy steel from six companies. Now I buy from one because demand has become very weak,” Al-Zeini said. “With the rise in inflation, the banks’ high interest rates have become more attractive than trading in building materials. The market is being pushed into recession as a result.”

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