CAIRO: The Ministry of Trade and Industry passed last week new resolutions to penalize steel producers, wholesalers and retailers who freeze steel production and supply on domestic markets, citing price hikes and suspension of market supply.
The new resolutions stipulate that steel rebar producers, wholesalers, and retailers publicly declare prices as well as notify the ministry every Sunday of production quantities, export capacities and domestic sales figures.
“Any violator will be imprisoned for one to five years and fined between LE 300-1,000. Furthermore, commodities will be seized and confiscated, the new resolution noted. “In cases of recidivism, penalties will be doubled.
“I think this decision sends in a good message that the ministry has put regulations on the market, said Tarek Shahin, construction analyst at Beltone Financial. “However, it will not apply much to factory producers. It is [only] applicable to merchants.
He explained that factory producers did not freeze production or cut market supply short. “All data indicates that factories are working round the clock, and there is not sufficient evidence to accuse them of holding production, he added, hinting at merchants manipulating the market.
Egyptian prosecutors began early March investigating 11 steel merchants – rather than producers – for allegedly increasing prices of steel on the market without justification. “There is a possibility merchants are keeping huge inventories, which [could imply] that producers are correct and merchants manipulate and freeze supply on the market, Shahin previously commented on the investigation.
On the heels of last week’s amendments, ministry officials found a major wholesaler known as Aatris freezing 1,300 tons of steel rebars in an attempt to deprive domestic market and manipulate prices. Officials confiscated the entire quantity – worth LE 5 million – and held the merchant in custody pending investigations and set bail at LE 30,000.
While the ministry stated that its decision aims at controlling “unjustifiable upsurges in steel prices, experts believe the decision will not curb soaring prices but will only increase local supply.
“Steel supply on the local market will ease on, but the decision will not affect producers’ prices because ex-factory prices are marginal with international prices, Shahin pointed out.
Steel prices have been surging since beginning of the year, with market heavyweight Al Ezz Steel Rebars raising this month its ex-factory selling prices for long products (rebars) and flat products to an average of LE 4,250 per ton ($770) and LE 4,300 per ton ($780), respectively.
Steel currently sells at record highs of some LE 5,600 per ton, up from LE 3,900 last December. Similar price increases are expected throughout the year.
