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Egypt Government Opens Steel Market to New Competitors

Countering long-standing allegations of monopoly, the government is taking measures to stimulate the steel and iron market, opening it up to competitors

Bassem Abo El Abas, Friday 26 Nov 2010
Steel Factory
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Amidst the backdrop of lingering allegations of monopoly in Egypt's iron and steel industry, the government has announced it will give priority to new competitors, following its open call for bids on licenses for the production of 2 million tons for iron and 1 million ton for billet.

The announced licenses, which will be granted through bidding - up to 500,000 ton per company - gathered nine bids from new and existing market producers.

"Priority in granting licenses for new iron production plants at the first stage are limited to new competitors or companies that have not previously obtained licenses in 2008", said head of the Industrial Development Authority, Amr Assal, to Al Ahram Online by phone. He said the government aims to balance the market and open opportunities for new competitors.

Al Ezz Group, which controls 60% of the local steel market and was the centre of allegations of monopoly in recent years, did not participate in the bid, "out of fear of getting under the fire of the Anti-Trust Authority," said a source at the Ministry of Trade and Industry.

This marks a shift in government policy compared to the 2008 bid, where all major producers in both the cement and steel sectors were treated on equal foot with other bidders.

The only market producers which fall outside the new parameters are potential bidders from Upper Egypt, where the government is taking measures to stimulate the local economy. 

"Investors in Upper Egypt will be exempt from the public bid. They will be granted the license directly," said Assal, adding that if offers exceed needed quantities of production, the government will call for an auction on licenses, with the exception of Upper Egyptian ventures, where investor will get the license plus other many financial incentives. 

The nine applications received are all from producers with marginal market shares. Most of them currently rely on importing billet, a form of steel that needs to be processed into the final product. "A license to produce billet will reinforce their positions in the market," Assal said.

Among appliants are the local steel makers Beshay, Abou Hashima and Al-Garhy.  The world first steel maker, Arcelor Mittal expressed interest in the licensing opportunity, but did not submit a bid.

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