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Searing hot: Steel prices ring in the new year at an all-time high
Published in Daily News Egypt on 07 - 01 - 2008


CAIRO: It seems that January's cold weather has failed to cool down searing prices in the steel sector, which have been rising to unprecedented highs since the New Year.Market heavyweight El-Ezz Steel Rebars abruptly increased steel prices an extra LE 250 per ton as of Jan. 1, which means that wholesale steel prices soared to LE 3,830 per ton and consumer prices hit LE 4,100. Consequently, several other steel producers increased prices to LE 3,925 per ton, while traders expected market prices to rise to LE 4,000 per ton and further intensify within days. In the meantime, El-Ezz Steel officials justified domestic upsurges in the sector to leaps in the international market, which "directly reflect on the domestic market. The company said that international indicators point towards hikes in the price of raw billet, predicting it will exceed 40 percent this year. That is equivalent to $700 per ton, "which would be reflected strongly on the local market. However, experts in the sector called recent price hikes unjustified in light of rising world prices and domestic "scrap prices. They expect prices to reach new highs. Several experts accused El-Ezz Group ­- which controls more than 60 percent of the market - of monopolizing the sector and unjustifiably hiking prices. They also pointed to Ahmed Ezz's political influence, claiming that being a member of the National Democratic Party enables him to raise prices to maximize profitability. Similar accusations have been hovering around El-Ezz Group due to a delay in finalizing an investigation on steel companies charged with monopolistic and anti-competitive practices. Several fingers pointed to Ahmed Ezz, accusing him of using his political ties to close the current investigation. However, the Ministry of Trade rejected these allegations and confirmed that the investigation is ongoing. In another development, El-Ezz Steel Rebars was among four steel producers recently awarded licenses to establish new steel operations in Egypt. The licenses had been in limbo since the government announced this past summer that cement and steel licenses would be offered in an auction. The government announced it would only offer the fifth license in an auction process. "It is unclear, at this point, how much the companies will be required to pay for their licenses, but we doubt they will be asked to pay more than what was originally proposed before the government announced the auction process in the summer, Beltone Financial told Daily News Egypt. "After licenses were awarded to cement license seekers in October, it is clear that the government has realized that the idea of auctioning steel licenses was ill-advised because, unlike cement, steel specs are very specific as far as capacity and technology are concerned. Contrary to the government's recent efforts to reduce cement prices, the October auction for cement production licenses allegedly pushed them to new highs. License prices went way above expectations, putting the burden of extra cost on producers.The Industrial Development Authority announced that establishing new steel plants would loosen El-Ezz group's grip on the market as well as lower production costs between 20 and 30 percent, which would eventually adjust market prices. The Ministry of Trade forecast that the combined output of the four new facilities would reach 8 million tons annually - bringing the number of factories to 10 nationwide and translating into a 50 percent increase in Egypt's total annual iron and steel production.

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