CAIRO: The price of steel rebars took a LE 300 dive this Saturday, May 1, which experts attribute to a decrease in international prices.
The Chamber of Metallurgical Industries stated that steel rebars prices were set to come down during the month of May, which was in part the result of the lowering of international prices by about $50 a ton (LE 250) in April.
The April drop may have also been impacted by a “strong recession in local sales activity,” according to Al-Masry Al-Youm.
“Factories [would] either fix May prices or reduce them, especially amid April’s decreased prices by about LE 150/ton,” the paper quoted the general manager of Chamber of Metallurgical Industries, Mohamed Hanafy, as saying.
In April, international steel prices went from $710/ton to $660/ton. According to Al-Masry Al-Youm, this occurred at the same time as a “retreat in local prices (for customers) by about LE 100-250, to reach LE 4,100/ton which is less than ex-factory prices announced earlier this month.”
Ismail Sadek, a construction analyst at investment bank Beltone Financial, however called into question the validity of the LE 100-250 for local prices, stating that he had not heard of such figures.
The reasons for the drop in international prices are “difficult to determine at the (international) level due to a plethora of factors involved,” said Sadek.
Nonetheless, he believes that the recent spike in iron ore prices by about 90 percent is a factor that most definitely played a role in the decrease.
The sudden increase in the price of iron ore triggered a reaction that forced prices to come down, he said. The rise “created a ‘push’ for other steel scrap components and the stock piling of inventory.”
But he also believes that the “current situation is unsustainable,” meaning the price would not decrease any further.
The current fluctuation as a “correction and not a broader trend,” he explained, pointing to the fact that there has been a global recovery in demand.
Samir Naaman, executive officer of Ezz Steel, a leading steel producer in Egypt, agreed that the recent price change is a correction and not a trend. He argued that what is occurring in Egypt is in line international developments.
Asked whether the price fluctuation would have much of an impact on the construction or real estates sectors, Sadek refuted that this change “would have much of a influence on either of these sectors.”
Naaman of Ezz Steel was of the same opinion. “Steel only represents 8 percent of building costs, while the bulk of expenses is due to land and not the structure itself.”
The price fluctuation was a reflection in costs and not a due to a change in demand for steel, he added.
Sadek explained that “traders in steel will change consumption from quarter to quarter; they will stock pile to compensate for next quarter”. Such activity creates fluctuations in consumption, he added.
According to experts, consumption would not pick up once again until price stabilization occurred.
The recent announcement in the fall in prices should reassure traders who were previously hesitant to buy steel rebars due to the high price. Sadek expects that traders will re-enter the market and begin to buy once again.
On the whole, Naaman feels that the steel sector has picked up quite well in the face of the global economic downturn, and that the economy overall has shown a healthy growth pattern of between 5 and 10 percent like most emerging economies.
