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Egypt Metals Report Q3 2009Product Type: Market Research ReportPublished by: Business Monitor International Published: July 2009 Product Code: R302-7029 Description Government stimulus programmes, with their focus on infrastructure and construction, will help sustainEgyptian steel consumption growth in 2009, but BMI’s latest Egypt Metals Report states that this willmostly benefit cheaper foreign producers while domestic producers will see their sales stagnate or fall.In the first four months of 2009, crude steel output was down 23.5% year-on-year (y-o-y) to 1.71mntonnes. However, March and April saw a recovery from a low of 397,000 tonnes in April, with the rate ofdecline in output at 16.4%. Other data suggests that the domestic market is lingering in a trough. Themodest uptick in crude steel output in Q209 came amid government efforts to prop up growth throughinfrastructure projects. We predict that construction sector growth will be at or slightly above 5.0% in realterms in 2010, but there is a significant danger that domestic steelmakers will lose out to cheaper imports.This is reflected in BMI’s forecasts for crude consumption growth, of 0.8% to 8.7mn tonnes, whilefinished steel consumption is forecast to grow by 3.9% to 6.87mn tonnes. Growth in demand may not necessarily lead to concurrent growth in output. Domestic producers arestruggling to keep up competition with cheaper imports and their market share is set to shrink in 2009.Over 80% of imports will be rebar. However, Egypt’s Ezz Steel still felt it necessary to raise rebar pricesfor May production, passing on recent increases in ferrous scrap and billet prices. BMI expects thedemand for rebar to drop off further in H209 as construction activity, fuelled by government incentives,moderates. Consequently, BMI forecasts that hot rolled product output will fall 1.9% to 6.53mn tonnes,with most growth in consumption served by imports. The influx of cheap steel products from abroad willlead to a 9.8% rise in imports of steel semis and finished products to 3.28mn tonnes. While steel consumption is likely to hold up, domestic production will suffer. Speaking to Reuters in June2009, Ezz Steel’s marketing director George Matta said: ‘Local producers lost 35 percent of the marketshare in Egypt to imports in 2009. This loss was unavoidable as production capacity couldn’t keep upwith the surge in demand.’ Ezz Steel said it expected H209 demand for rebars to be 3.3mn, down from3.9mn in H109. The company also forecast its total production for the year would remain steady at 5.3mntonnes. BMI believes that the company could still see a moderate decline in longs output in 2009, whileflats will suffer a sharp-slowdown. Beyond 2009, BMI believes the momentum should pick up from 2010, with the annual crude steel outputgrowth rate peaking at 13.8% in 2011 as pent-up demand is released. By 2013, crude steel output shouldreach 8.23mn tonnes, up a third over the level estimated for 2008. Meanwhile, hot rolled production willrise by just under 30% over the period to 9.07mn tonnes. The growth in output will not be enough tosatisfy domestic demand for finished steel, which is set to accelerate by 65% over 2008-13 to 10.48mntonnes. As such, imports are forecast to rise by 77% over the period to 5.27mn tonnes in 2013. Table of Contents
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