CAIRO: Steel prices will decline in June for local producers including Egypt’s largest, Ezz Steel, according to analysts.
Local producers will drop prices by LE 300, while Ezz Steel will set them a bit above at LE 250, Al-Masry Al-Yom reported. For local producers this will bring their price to LE 3,600 per ton while Ezz Steel will set its per ton rate at LE 3,550 for ex-factory and LE 3,720 for customers.
Samir Naaman, executive officer of Ezz Steel, said that the price decrease can be attributed to the international market, which is currently highly volatile and in which prices have declined in general.
He mentioned that “corrections in the international market as well as fluctuations in the stock market” are having their effect.
Mohamed Hanafy, general manager of Metallurgical Industries, was quoted in Al-Masry Al-Yom as saying that dropping the price is logical in the context of the ongoing recession, which negatively affects demand. In addition to the economy, he indicated that demand restraints on raw materials have played a role.
Tarek Selim, associate professor of economics at the American University in Cairo, provided a more in-depth analysis of the recent decline, saying that broader trends have impacted steel prices.
Although the recent financial crisis is certainly one of the driving factors behind price fluctuations, Selim explained that the decrease can be imputed to other short and long-term factors.
“The change in dynamics regarding supply and demand as well as the general change in the market structure are having a dual effect on steel prices,” Selim said.
There has been an expansion in investment in the steel sector, creating more competition at the local level with the major player Ezz Steel, which has around a 60 percent share of the market.
As well, he noted, there has been an increase in imports due to a relaxation of the steel import policy, which “has been a wise policy,” Selim said, “because expanding supply will inexorably drive down price.”
Focusing on the real estate sector, Selim explained that Gulf investors who are heavily involved in the sector in Egypt, are under considerable constraints due to the crisis, thereby reducing their capital inflows into the country.
“This is certainly having an impact on the price of steel, as demand is being driven downward,” he said.
Asked whether the drop prices would be a long-term trend, Selim said, “After this year and the next, the pressure being exerted on the price of steel will be released, as, for example, the situation of investors such as the UAE will have improved.”
He did, however, stress that the change in the market structure on the supply side, with new entrants in the sector, is one aspect that will be a permanent dynamic.
For the medium term, Selim foresees the price of steel increasing on a more permanent basis, but this will not begin for another year or so. Over the longer term, much depends on government policy and political situation, but Selim does believe that a permanent downward pressure on prices will endure due to continued investment inflows coming into Egypt.
