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Egyptian steel company signs contract with Tata Steel Consulting to boost production

Flailing state-owned Egyptian Iron and Steel Company seeking help of UK-based Tata Steel Consulting in a bid to increase productivity

Ahram Online, Thursday 26 Sep 2013
Steel production
Steel production - one of Egypt's most important heavy industries (Photo: Reuters)
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Egyptian Iron and Steel Company has signed a contract with UK-based Tata Steel Consulting to provide a plan for increasing production levels, the company announced  in a statement sent to the Egyptian Stock Exchange on Thursday.

According to the agreement, Tata will provide a plan to increase production potential to reach 1.2 million tons of finished steel or 1.45 million tons of semi-finished steel annually. The most recent data available on the website of the Egyptian Iron and Steel Company show that total production of total finished products between 1st of July 2011 (beginning of fiscal year) and 31st of January 2012 was 290,240 tons.

The mostly state-owned company has been suffering from chronic losses in the past years, which reached LE675 million in the third quarter of the 2012-2013 fiscal year, and LE401 million in FY 2011-2012.

"The losses made by Egyptian Iron and Steel Company can be attributed to the company's problems with its supply chain as well as labour productivity." Allen Sandeep, head of the research department and steel analyst at Cairo-based Naeem Brokerage, told Ahram Online.

But the company is  fundamentally strong, says Sandeep, "because their raw materials are obtained from mines in Aswan, Upper Egypt, and hence are not exposed to the volatility of international markets."

The steel industry in Egypt has suffered from overcapacity since the January 2011 revolution and its aftermath caused consumption of finished steel to drop to 7.3 million tons in 2011, compared to 8.5 million tons in 2010.

Nonetheless, the company's higher production targets will address a domestic shortage in flat steel, says Sandeep, 44 percent of which is currently imported.

The company is 90% owned by state-owned Metallurgical Industries Holding.

Tata Steel is a member of the Indian multinational Tata Group, which comprises over 100 operating companies in communications and information technology, engineering, materials, services, energy, consumer products and chemicals. It has operations in more than 80 countries across six continents.

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