CAIRO: The Ministry of Trade and Industry announced this week that it would scale back import tariffs on flat steel, a move that is likely to have little effect for consumers or manufacturers in the Egyptian steel market.
Tariffs for importing steel in Egypt have long been 5 percent. But when the global economic crisis struck, the Ministry of Trade and Industry sought to protect the domestic steel industry so it imposed an additional 10 percent tax on imports.
This week’s measure eliminates that additional tax, though there is some suggestion that the additional tariff, which was decided upon in early February, was never fully implemented.
Flat steel, upon which the tariff was implemented, is largely used for industrial purposes.
“In general, [flat steel] is used for things like tubes, piping, and appliances, said Patrick Gaffney, steel expert and Vice President at investment bank EFG Hermes.
The safeguard tariff was designed to help the steel industry through a time when steel industries around the world are suffering.
“Flat steel producers have been very heavily hit worldwide, including in Egypt, said Gaffney.
Even though the elimination of the safeguard tariff may make it easier for steel manufacturers abroad to export steel, analysts suspect that the change may have little real impact.
“I think the impact is minimal, said Gaffney.
Because the tariff was only applied two months ago, its elimination is not likely to shake up the industry significantly.
The tariff was applied specifically to cold rolled flat steel. Ezz Steel, which is Egypt’s largest steel producer and carries significant sway in the market, doesn’t produce a significant amount of cold rolled flat steel, further reducing the chance that the new ruling will dramatically effect the Egyptian marketplace.
Minister of Trade and Industry Rachid Mohamed Rachid announced that the elimination of the tariff would be replaced by a 15 percent subsidy for all domestic producers.
Steel sales continued to rise through the second quarter of the 2008-2009 fiscal year. The third quarter, though, which ended in March of this year, is likely to see something of a drop in sales.
The country’s real estate industry was initially unaffected by the global economic crisis because Egypt’s financial system hadn’t gotten involved in the now infamous securitization schemes that Wall Street did.
But as demand for new real estate development has faded, experts predict that the slump in the steel market might be significant and sustained.
An Ezz Steel official told Reuters this week that global steel demand may be off by at least 35 percent this year and that it won’t recover until 2011.