Egypt plan to charge steel makers for energy hikes meets

The Egyptian government's plan to retroactively charge steel producers for an increase in energy prices has met strong criticism from the country's federation of industries.

The government told producers the new prices would be applied retrospectively from January 1st 2012 a move that has upset representatives from the metal industry.

Mr Mohamed Hanafi chief of the Egyptian chamber of metal producers said that "They are not ready to accept such a decision given that it's being retroactively applied."

The government announced in January its plan for 33% hike in the prices it charges heavy industry for of natural gas and electricity in a bid to narrow its growing budget deficit. Natural gas prices will be raised from USD 3 per million to USD 4 per million British thermal units while electricity prices will climb from EGP 0.24 to EGP 0.30 per kilowatt hour.

steel expert at an investment bank said that "This is nothing new, since the start of the year we knew energy prices were supposed to increase. The changes will cost steel producers between EGP 50 per tonne and EGP 70 per tonne quite insignificant for them."

Steel and cement producers who are as well subject to the hike in energy costs, raised the selling price of their final products to compensate by around EGP 100 per tonne in January despite comments from analysts that new prices were unlikely to have much effect on their profit margins. Steel prices now average around EGP 4,560 per tonne on the local market after the EGP 100 price rise while cement now retails for around EGP 400 per tonne.

Mr Ahmed Al Zeiny chief of the construction materials division of the Egyptian Federation of Chambers of Commerce said that "Steel and cement imported from Turkey are cheaper than those which are locally produced even though Turkish producers don't benefit from energy subsidies. Egyptian steel is sold in Libya for less than it is on the local market. Can you imagine?"