CAIRO: As a weakening global economy continues to hit key steel-consuming industries such as construction and automotives - denting international steel prices - some traders in Egypt have reportedly lined up to import thousands of tons of steel. According to local reports, the Egyptian market will be flooded with 100,000 tons of steel in February from the Ukraine, Turkey and Greece at a price range of between LE 3,500 and LE 3,700 per ton. Ismail Sadek, construction analyst at Beltone Financial, said that one of the reasons some traders resorted to importing steel is because of a price discrepancy between local and international prices. "Traders see a gap.an arbitrage opportunity when they import steel at cheaper prices and sell it in the Egyptian market, he explained. "Egyptian steel producers' reaction to falling international prices is not quick enough to prevent such a phenomenon from happening. Steel prices shot up globally during the busy summer construction season, but were later knocked down as the financial turmoil weighed heavily on the industry. Deepening concerns about a relentless global economic recession has kept consumers away from purchases of houses, cars and home appliances, lowering demand for steel worldwide. On Dec. 19, steel prices on the London Metal Exchange, based on the Mediterranean three-month billet contract, tumbled 70 percent since June. Sadek pointed out that traders did not import any steel last summer despite absence of any ban because there wasn't a big difference between domestic and international prices. "But now there is a difference, he added, saying imported steel was cheaper by around LE 300-400 per ton. Besides benefiting from cheaper prices, Egyptian steel traders could also be importing types of steel not locally produced, pointed out Patrick Gaffney, steel analyst at EFG-Hermes. "They are either importing steel because they can't find [this type] in Egypt or because it's cheaper, he added. As cheaper imported steel is to enter the market, local steel producers could have to slash their prices to save their market share. Sadek said such a price discrepancy could pressure local steel producers to push prices down to remain competitive. Ezz Steel, Egypt s largest steel producer, has set its January ex-factory prices at LE 3,750 per ton and consumer prices at LE 3,950 per ton. Samir Noeman, chief sales executive at Ezz Steel, ruled out the possibility that cheaper imported steel would have any impact on the company's prices. "We review our prices on a monthly basis, and it is still too early to say whether February prices will be changed, he added. The company has been trimming its prices since November, when it announced a 30 percent price cut, as slowing economic growth and the global credit crunch have forced builders to slash orders. Several producers and traders worldwide have portrayed a gloomy picture for consumption prospects in 2009, with some predicting further output cutbacks and expansion plans being put on hold. Ezz Steel, which holds about 65 percent of Egypt s steel market, revealed on Dec. 15 it has cut its production since October due to weaker consumption. Like everybody else we are adjusting our production to the new demand reality, George Matta, chief marketing officer at Ezz, told a Dubai steel conference in December. Our export business has been affected, so we are producing less than normal, he said, but declined to give an exact percentage for how much the company has cut production. Production was about 4.8 million tons in 2007. As a percentage of total sales, exports have shrunk last year, with flat product exports plummeting to 37 percent from 47 percent and long product exports dipping to 2 percent from 11 percent. Flat products are typically used in consumer and industrial goods, and long products are primarily for construction. The steel industry is no doubt going through turbulent times, Matta said, adding he expected rebar, billet and scrap prices to remain depressed until the first quarter of 2009. Billet prices are expected to remain depressed until the rebar demand is recovered which is not expected until February 2009 and the destocking has come to an end, he explained. The company posted net pretax profit of LE 3.4 billion ($615.1 million) in the first nine months of 2008, a 56 percent increase over the same period in 2007. Net sales soared 45 percent to LE 17.4 billion, from LE 12 billion.
