CAIRO: In a week that has brought a flurry of headlines to the steel industry, the Egyptian Iron and Steel Company announced its plan to increase steel prices from LE 5,900 to LE 7,500.
The move comes at a time when steel prices have been steadily increasing and government officials have taken a myriad of steps to curb this trend that has had broader cross-industry implications.
“Prices have been increasing since 2005, noted Patrick Gaffney, vice-president at EFG-Hermes and steel industry expert.
Gaffney also observed that 2004 represented a rare year of price stability, with volatile years before and after.
Al Ezz Steel Rebars is a prime example of a company whose steel prices have skyrocketed in 2008. The steel giant recently raised its ex-factory price of steel again in August from LE 6,250 per ton to LE 6,630 per ton, an increase of LE 680 from the previous month’s price.
In January, a ton of Al Ezz steel cost LE 3,700.
These price increases have had a bearing on the real estate market, forcing housing prices progressively higher.
Some real estate developers, notes Gaffney, have decided to hedge against rising steel prices by buying inventory up front.
Bulk purchases of steel in fear of rising price trends have done little to instill confidence in the market.
Price increases have led the government to step in as part of an effort to stabilize prices domestically. In one move, it issued an export tariff of LE 160 per ton in an effort to boost domestic supply.
Shifting the type of steel that the companies produce may also have a bearing on prices. Long steel, for example, which is used in construction, is more highly in demand than flat steel, which is used for industrial products.
Ezz Steel, noted Gaffney, produces 3.1 million tons of long steel and 1.7 tons of flat steel. It exported only 10 percent of long steel in 2007 and 60 percent of its flat steel.
A further shift by companies to boost long steel production could better stabilize price levels.
New reports also suggest an increasing effort by the government to boost investment in new steel production plants. Metallurgical Industries will submit a proposal later this year to the Industrial Development Authority about building a new steel plant in Upper Egypt. The plant is expected to cost up to LE 7 billion with an annual capacity of 1.5 million tons. There are currently studies to offer a 20 percent stake in the new company to the public
In another move, the Ministry of Trade and Industry and the Ministry of Investment announced a plan to invest LE 35 billion to build steel, cement, and fertilizer plants.
Regardless of plans to build new plants, they are not expected to have any short-term bearing on steel prices.
Gaffney noted the handful of new steel plant licenses issued in 2007.
“We’re not expecting to see those until very late 2010, he said, discussing when he expected the plants to come online.
