Increases in the prices of cement and steel are raising question marks in the building materials market about the reasons behind the hikes, with cement factories last month raising their prices by an average of LE300 per tonne, meaning that cement is now sold to the end consumer at LE700 to LE800, the highest-ever price. Steel factories are now selling steel at an average price of LE5,500 per tonne, an increase of about LE200 on last month's levels. The surge in steel prices followed a court ruling supporting a 2012 ministerial decree that imposed duties of LE299 per tonne on imported steel to protect local production against threats to the local market. The ministerial decree was issued after local steel producers complained that imported steel was flooding the market. As a result, imported steel now sells for more than LE5,700 per tonne, a higher price than for the local product. Al-Sayed Atrees, a steel importer, said that imported steel had previously helped to balance the market and had prevented unjustified price increases by local producers. “The safeguard duties imposed on imported steel now allow local producers to control the market and to monopolise it,” he said. Ezz Steel, Egypt's largest steel producer, has said that the increase in steel prices is a result of the increased value of the dollar. “International prices of billet, a raw material used in steel production, have plunged slightly, but the higher dollar exchange rate has left us with no choice but to increase the price of our end product,” Samir Noemani, marketing manager of Ezz Steel, told news agencies. Ahmed Al-Zeini, head of the Building Materials Division at the Cairo Chamber of Commerce, said that local steel and cement factories were unjustifiably attributing their higher prices to the higher dollar rate and the government's decision to almost double the price of energy supplied to the country's heavy industries. “The energy price increases represent about 25 per cent of the cost of production, but the cement factories have increased their prices by over 80 per cent in the recent price hikes,” he said. One source at the Suez Cement Company, who preferred to remain anonymous, said that several factors had led to the increased prices, including increased prices of gas and mazut, the fuels used to operate the factories, and increased transportation costs as a result of buying diesel at black-market prices due to its unavailability at gas stations. The source went on to say that frequent power outages had led the factories to use electric generators run by diesel as well, also increasing costs. He added that the production volume of the company had declined by 25 per cent since the beginning of this year due to shortages in the fuel supplied by the government to the company's factories. The production capacity of local cement factories is more than 60 million tonnes per year, but this dropped to 54 million tonnes in 2012, according to the Ministry of Industry and Foreign Trade. Shortages in the fuel supply were cited by Medhat Estifanous, head of the Cement Division at the Federation of Egyptian Industries, as a factor that could cause a 20 per cent drop in production by this year's end. Estifanous was quoted by the Anadolu News Agency as saying that he expected production capacity to drop to 51 million tonnes by the end of 2013, something that could lead to more price hikes. Al-Zeini said that a tonne of cement cost less than LE300 to produce, but that producers were setting large profit margins and making “billions in profits”. “This is evident when we find Arish Cement, owned by the Egyptian Armed Forces, selling its products for LE490 and making about LE400 million in profits in 2012,” he said. There are 21 cement producers in Egypt, representing a total investment of some LE60 billion. Most of them are foreign-owned. “The price hikes of steel and cement have got nothing to do with the reasons announced by the factories. They are simply the result of monopolistic practices that the government is unable to control,” Al-Zeini said. The government should act to protect the market and consumers by activating Article 10 of the competition protection and anti-monopoly law, which allows it to impose prices on strategic products for a limited period of time to stabilise the market, he said.
