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Ministry sets new rules to allay steel buyers' price-jacking fears
Published in Daily News Egypt on 25 - 05 - 2008

CAIRO: The Ministry of Trade and Industry introduced new rules this week that aim to cool rapidly mounting steel prices by making steel sellers comply with price limits set by their producers.
The new rules allow producers to quote a resale price ceiling to their retailers and stop trading with them if they exceed it.
Incensed steel buyers, seething last week as prices hurdled over LE 8,000 per ton, have recently spurred the state to more closely monitor and combat overcharging.
While the Egyptian Competition Authority (ECA) acknowledges that overcharging can hinder competition, it is not explicitly illegal here as it is in the United States, said Haytham Gammal, a senior researcher at the ECA.
"Charging too much, in itself, is not a violation, he said. "According to this principle, we cannot declare any person or any economic operator in breach of the law without an express provision in competition law.
Steel producers, rattled by complaints of retailers' price-jacking, started asking if they could set resale price limits about two months ago, Gammal said. Since the start of this year, Al Ezz Steel Rebars has been publishing its ex-factory prices to discourage wholesalers from overpricing.
Under the new rules, producers must report their maximum rates to the Ministry of Industry within the first week of each month so that the ministry can pinpoint where price speculation is occurring, Gammal said.
The Egyptian steel market had a wild first quarter this year, as a construction boom and global spikes in the prices of items like iron ore and coal have, in concert, pushed production prices to record highs. Many consumers have charged that retailers are trying to pump prices even higher, largely because end prices have fluctuated more quickly than ex-factory prices.
Last week, rankled customers gathered outside an Al Ezz Rebars steel factory in Qalyubia, accusing the firm of selling only to retailers rather than directly to consumers, according to the local press. A few days later, Mustapha Bakry, editor-in-chief of Al-Osboa newspaper, complained to police that owner Ahmed Ezz is monopolizing the industry.
In late March, Egypt banned steel exports to help cool prices.
Gammal said the ECA will wait to see if the new measures help lessen speculation before they consider doing more. If the rules are not effective, they may consider pushing for an amendment to outlaw excessive pricing, he said.
This would be a controversial step. Economic opinion, even in markets that outlaw excessive pricing, often splits over whether such limits are ultimately in consumers' interests.
"Excessive pricing supposes that you are charging a higher price than you should be, Gammal said. "To define the 'right' sale price in the market is quite difficult.


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