Egyptian government has begun to protect local industry, expect to increase anti-dumping cases in 2018: WTO

A government source told Daily News Egypt that the Ministry of Trade and Industry is expected to issue a decision to impose a permanent fee on imports of steel pallets for three years, which he considered sufficient, to protect the local market and ensure price stability after the end of the investigation period on Egyptian imports of steel and pallets.

The source pointed out that the ministry of trade and industry imposed temporary protection fees on pallet imports because they found a large increase in the volume of imports. These fees are not intended to prevent imports, but to return prices to a fair level, which reflects the real cost of the product and not a dumping price to rid exporters’ surplus, which significantly harms the Egyptian industry.

The Minister of Trade and Industry, Amr Nassar, imposed a temporary protective fee of 25% on iron and steel imports and 15% on the steel billets for 180 days as of 15 April. The trade minister’s decision came in response to the demands of local large-scale pallet mills, who complained of pallet dumping in the market following United States tariffs on steel imports which led to a large global surplus.

The source said that the ministry issued a decision after nearly a year of studying the market state, which resulted in proven damage to the local industry, adding that the ministry is currently investigating the file and that if no damage was proven and the case was cancelled, the collected sums will be returned.

The owners of 22 rolling factories objected to the decision to impose a fee on the imports of steel billets. They considered it as a threat to their investments, which were estimated as billions. They threatened to resort to the Administrative Court to challenge the decision and stop it in order to protect their investments and prevent what they described as monopoly on the prices of the pellets by full-cycle factories. 

In this regard, Rafik El-Daw, managing director of the steel company and a member of the Chamber of Metallurgical Industries, said that rolling mills are still making a profit even after the imposition of the latest protection fees. The price of the tonne of steel billet is $443 and with the fees are EGP 250 for expenses, EGP 850 for rolling costs, and 14% of value-added tax, price reaches EGP 10,864, while the average sale price is EGP 11,370 per tonne, indicating a profit margin of EGP 500.

“Steel billet prices have fallen by 18%, while iron prices have increased by 3.5%. Small factories can sell cheaper than factory-produced pallets,” El-Daw said.

Ahmed Abu Hashima, managing director of the Egyptian Iron Company, explained that the cost of the steel industry is higher than the cost of the rolling mill, which only converts steel billets to a reinforced steel, while the steel producers pass through four different stages: importing reduced iron, smelting the steel, converting it to steel billets, then turning it into steel.

Abu Hashima added that the number of full-cycle factories operating in Egypt is about 16 factories with a production capacity of 10.670m tonnes. The number of rolling mills is about 16 factories with a production capacity of 2.740m tonnes.

In a similar vein, a source at the World Trade Organization (WTO) said in a specific statement that the Egyptian government-like many other countries in the world-has begun to take measures to protect its local industry as a member of the WTO. And “this is a natural step, even if late”, according to the source, especially after the decisions taken by the US during the past year to impose tariffs on imports of steel from all countries of the world. This was followed by the European Union, and other countries such as Turkey, Canada and some countries of the Arab world such as Algeria and Tunisia, in order to protect their national industry, and to not become an alternative market for imports of iron and steel.

According to WTO figures, imports of developing countries rose by 15 to 30% during 2018. Egypt alone recorded an increase in imports of about $13bn to $73,682bn, compared to the same period of 2017, or 21.5%. The increase is due to industrial and agricultural imports, according to the study.

The source of the WTO said that there are three types of prevention, including against government support by countries in order to support their products so as to help them penetrate other markets owing to the low prices of the domestic product. This is what the Egyptian government recently proved against a number of countries related to iron and marble products and, “given the sensitivity of political relations between governments, preventive measures seem important at the moment.”

In this context, the WTO source expected an increase in the anti-dumping cases facing the WTO, which amounted to about 100 cases in 2017, and attributed that to the preventive measures initiated by a number of countries to protect their markets from the invasion of foreign imports. The sources continued: “If 180 days pass and it was proven that there is no increase in local market imports of the pallet-which has a negative effect on the industry-then the temporary protection fees for importers are returned.”

The ministry of trade and industry imposed a five-year fee on imports of iron from China, Turkey, and Ukraine, with rates ranging from 7 to 29%. A number of manufacturers considered the decision inappropriate, and imports of steel billets and rebar–especially since Egypt’s imports during the first 11 months of 2018– rose to $73.682bn against $60.653bn during the same period of 2017, up 21.5%.

The ministry, using its authority from the WTO, imposed temporary protection fees for 180 days, 15% on imports and 25% on rebar imports, starting from 15 April until the completion of investigations by the Anti-Dumping Agency. Protection fees are a measure taken by the government to return to normal and fair prices, especially following the recent rise in the prices of iron, specifically as the instability of prices threatens the growth of the parallel market

Q and A related to protection charges for Steel billets and steel imports

Is it possible for a company to file a complaint against a product you import and why?

Yes if the main activity of the complainant’s industry is manufacturing and not import, as long as the complaining industry represents the predominant proportion of the total domestic production of this product. Factories which supplement their production by imports are producers, while the importer- who produces as a side activity-is considered an importer.

Is it possible to impose preventive measures if the increase in imports is in line with market growth?

Yes. Article 4 of the WTO Convention on Prevention states that prevention requires a significant increase in the volume of imports in absolute terms or relative to domestic production. Increased imports should not be assessed in relation to the size of the domestic market. If there is damage in the domestic market and there is a causative relationship between the large increase in the volume of imports and the damage caused, the imposition of a precautionary measure is justified.

Why have preventive measures been imposed on pallet imports despite the inadequacy of local steel billets?

Preventive duties have been imposed on steel billets imports because the Egyptian Ministry of Industry and Trade found that application conditions have been met. This is a significant increase in the volume of imports due to unexpected global developments which caused serious damage to the local pallet market, especially since the ability of the local industry to meet the needs of the market is not required. The imposition of such measures is not intended to prevent imports but to return prices to their fair level, which reflects the real cost of the product rather than a low price intended to discharge exporters’ surplus output.

Rolling companies say that the losses of the integrated industry are due to reasons other than imports of steel billets, which means higher gas prices.

This is not true. Gas prices rose to $7 per million thermal units in 2014, before the increase in long-term imports of pallet, resulting in severe damage to the domestic steel industry not caused by gas prices. The boom in pallet imports occurred in 2018, the year in which the domestic industry experienced a major deterioration.

Can rolling mills apply for protection against imports of steel billets used as coal in integrated plants?

No, because there is no localisation of steel rollers and therefore there is no damage to the local industry. According to the WTO Convention on Prevention, preventive measures can be applied if there is damage to the domestic industry.

The interests of consumers may be affected if prices are raised as a result of preventive measures?

Investigative authorities consider the public interest before imposing preventive measures and their effects on the working interest. It is not limited to selling prices, but there are other elements such as the volume of investments and threatened labour, in addition to the loss of taxes and the elimination of a strategic industry.

Is the size of the investments of the complainant industry taken into account when deciding on the imposition of preventive measures?

Yes.

Can rolling mills resume preventive measures before Administrative Courts?

Yes. Article 95 of the regulation gives all concerned parties, including importers, this right. The judge will review the extent to which the measure conforms to Egyptian law, but the investigation will not be re-examined or amended in the decision because the right of investigation is limited to the ministry of industry and trade.

Iron producers in Egypt