Egypt "has faced a decline in production due to the accumulation of raw materials in ports and delays in customs releases caused by the scarcity of US dollars, " said Tareq El-Geyoushi to Ahram Online.
“It is true that some companies and factories within the industry have closed or decreased their production. Probably it is not permanent because it all depends on the demand and the availability of raw material," Mohamed Hanafi, the director of CMI, said.
He added that the production level has “for sure” been affected by the current circumstances.
The industry is still recovering from the COVID-19 pandemic.
In 2022, Egypt produced 9.8 million tons of steel, making it the largest steel producer in Africa and the second largest in the Middle East and North Africa (MENA) region, according to a report by Fitch Solutions April 2023.
In 2020 and 2021, Egypt produced 10.3 and 8.2 million tons, respectively, according to data from World Steel Association.
Despite the decline, Hanafi said “the amount of steel produced and supplied to the market [is still sufficient to meet] domestic demand.”
He pointed out that “demand declined heavily” due to several reasons including the current pause in new national megaprojects and a slowdown in the construction of new private housing.
The government's decision in January to put new projects requiring US dollars on hold has also had an impact on demand.
The slowdown in demand can also be attributed, according to Hanafi, to the higher steel prices compared to last year.
The average price of steel rebar during the first five months of the year was EGP 34,220 per ton, compared to EGP 17,400 per ton in the same period last year.
Rehan Hamza vice president of research at AlAhly Pharos, a securities brokerage house, told Ahram Online the prices are expected to decrease soon due to the decline of iron ore prices and local demand.
“The overlapping conditions of a declining domestic demand, the shortage of hard currency and importing crisis are creating a kind of balance [in the market],” she explained.
Hamza added that recent estimates expect domestic demand for steel to decline to seven million tons, or by 10 percent, during 2023 compared to 2022.
Real estate hikes
Real estate has been one of Egypt's major investment sectors that has been flourishing in recent years, with a remarkable rise in prices that are not going to slow down.
“The real estate sector will surely be impacted by the declining production from the iron and steel industry," El-Geyoushi said.
He explained that the units' delivery schedule will be delayed and that the construction costs will rise leading to an increase in the prices of the units as well.
After setting new regulations to protect real estate buyers’ rights last year including delivery obligations to developers, the government decided in February to extend the delivery deadlines for real estate developers by 20 percent.
In order to keep production going, El-Geyoushi said that many factories have shifted to exporting steel to secure foreign exchange needed to release raw materials from customs and so on.
Though the quantity of Egypt's exports of steel increased in 2022 compared to 2021, their value declined by 21 percent to $1.412 billion down from $1.781 due to difference in currency exchange rate.
El-Geyoushi pointed out that the obstacle to that solution is the availability of raw materials needed to start production and exporting afterwards.
“It is a closed circle… the crisis will be solved by securing currency for production inputs and raw materials this is the main point,” he added.