Steel and cement prices continue to rise, Mona El-Fiqi reports Following decrees which imposed additional duties on exports of cement and steel, prices have continued to rise despite dropping slightly in the last few weeks. Steel producers justified this unprecedented increase in prices explaining that the prices of various international components involved in the manufacture of iron and steel have also risen, while the price of cement rose due to an increase in domestic demand. In February, the price of cement and steel soared from LE330 to LE380 per tonne of cement and from LE3,350 to LE3,800 per tonne of reinforced steel. In response, the Ministry of Trade and Industry intervened to control the price of these essential construction materials. On 27 February, the ministry issued decree number 142 that imposed additional export duties of LE65 per tonne of cement and LE160 per tonne of steel. This was aimed to reduce export figures of cement and steel in order to meet domestic demand. This move, according to Rachid Mohamed Rachid, minister of trade and industry, is legitimate by World Trade Organisation (WTO) standards. This decree was not enough to stabilise the market, so another ministerial decree, number 216, was issued on 21 March raising the export fees on reinforced steel from LE160 to LE180 per tonne. The additional export fees according to the second decree are imposed on four out of nine categories of iron and steel. According to the Ministry of Trade and Industry, the total revenues accrued from additional fees imposed on cement and steel exports from last February till April is LE23 million. Following the official decrees, the cement prices dropped to LE350 per tonne during March. But in April cement prices rose to LE370 per tonne. According to the Ministry of Trade and Industry, the reason behind this increase was high demand. In Egypt there are 11 companies which produce cement. The total production of these factories is 37.9 million tonnes of which 29.2 million is produced for local use, while the remaining 8.7 million is exported. Steel prices also rose again to reach LE3,700 per tonne on 21 April. Producers say that iron and steel prices are controlled by the international prices of materials used in the manufacture of steel. Mohamed Sayed Hanafi, general manager of the Metallurgical Industries Chamber at the Federation of Egyptian Industries (FEI) explained that in January international prices of materials used in the manufacturing of iron and steel rose from an average of $80 to $120. According to Hanafi, the imported materials represent 50 to 90 per cent of the iron and steel production cost. According to Hanafi, the government cannot set prices for products, and the ministerial decrees are aimed at reducing exports. Responding to official decrees, Hanafi added that local iron and steel companies fixed prices at LE3,250 per tonne of reinforced steel during March. Hanafi explained that over this month companies used their strategic inventory of imported inputs to keep prices at this level. But in April, companies had to import inputs at higher prices. So prices rose to LE3,600 per tonne of reinforced steel. According to a weekly survey conducted by the internal trade department at the Ministry of Trade and Industry, the total production of steel rose to 110,000 tonnes during the second week of April, "the sixth week after the application of the decrees" compared to 98,000 tonnes the week before. Moreover, steel export figures dropped from 28,000 tonnes to 10,000 tonnes over the same period. These exports were underway before duties were imposed. Moreover, steel and iron delivery to the local market rose from 89,000 tonnes during the fifth week to 91,000 tonnes during the sixth week. However, the exports of steel and iron remain profitable for producers even after export fees were added. The export price per tonne of reinforced steel went up from $600 to $620. According to Hanafi, a number of companies are able to export and compete on the international market. Most companies prefer to sell on the local market where financial exchanges are quicker and easier. So experts speculate that export rates will fall over the coming weeks. Hanafi added that steel prices are expected to go down by the beginning of June, given that this week the prices of imported materials and inputs started to decrease between $10 to $20 per tonne. According to figures from the Chamber of Metallurgical Industries, the total production capacity of 21 iron and steel companies is 7.5 million tonnes annually. Production in 2006 was 5.3 million tonnes with 4.1 for local consumption and 1.2 million tonnes for export. A study conducted by the Chamber of Metallurgical Industries explained that a list of public as well as private development plans in the Middle East and Gulf countries is another factor which accounts for the rise in steel and cement prices and their inputs. This increase in development and construction plans exceeds 31 per cent annually. Hanafi added that the increase in development plans, despite the rise in steel and cement prices, indicates that doing business in the construction sector remains a profitable undertaking.
