Steel mills are unable to bear the additional burden of the government's planned rise in energy prices, the Chamber of Metallurgical Industries, part of the Federation of Egyptian Industries, has said, complaining of already deficient supplies of gas and ongoing electricity outages. "Steel mills are shut down practically one third of the day because of electricity outages, and there is a significant shortfall in the supply of gas," Gamal Al-Garhy, chairman of the Chamber Metallurgical Industries and of Suez Steel, said Thursday.
In remarks made during a visit to the Suez governorate last week Prime Minister Ibrahim Mehleb announced the government's intention to raise the price of energy for energy-intensive industries that have not seen price increases during the latest period, most notably steel. "The price of gas for steel mills is currently $4 per million BTUs, up from $1 to $2 before the revolution," Al-Garhy said. Electricity prices rose from EGP 0.11 per kilowatt to about EGP 0.46, he added. "Suddenly raising energy prices in a haphazard way hurts companies that have loans and financial obligations they need to repay," said Al-Garhy. The chairman argued that the steel industry is different from the cement industry, which currently receives its gas at $6 per million BTUs, because most of the cement industry's raw materials are local, whereas steel factories import raw materials from abroad at high prices. Since they purchase the materials in dollars, the steel factories also have to contend with continuous price fluctuations. "Better supplying companies with gas and electricity regularly and helping them achieve full production capacity should precede any increase in energy prices," said Al-Garhy. Mohamed Hanafi, director general of the Chamber of Metallurgical Industries, said: "Factories with furnaces for smelting will be affected the most by rising gas prices …especially the plants in Dakhlia, Beshay and Suez…and all factories will be affected if prices of electricity are increased." "There has been a problem in supplying gas to the factories since the time of the revolution in 2011 up until now..and plants have been operating at a production capacity of no more than 60% or 70%," said Hanafi. Despite not working at full production capacity, plants also suffer from the over accumulation of their inventories, which have reached 150,000 tons, he added. Hanafi said that the 1m housing units project, which the government plans to implement with the Emirati company Arabtec, will not significantly push up demand, as the project is being implemented over five years, or approximately 200,000 housing units per year, which only require 600,000 tons. This is only equivalent to one month of steel mill production. The director general pointed out that the Engineering Authority of the Armed Forces is coordinating with those responsible for implementing the project so as to rely primarily on domestic steel rather than importing materials for the project. However, for steel distributors importation of steel is important to compete with local producers and prevent their monopoly.
"Steel consumption currently ranges from 150,000 to 200,000 tons per month and importation is very weak, but it is important to limit the attempts of local companies trying to dominate the market and impose their prices," said a dealer and distributor of steel, indicating that steel plants get subsidised gas and a large number of benefits in Egypt, and despite of this and the pound-dollar exchange rate, their prices still remain higher than imported steel.
