Egypt may Impose Import Duty on Steel Imports: Reports
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According to the latest market reports, Egypt is considering the imposition of import duties on steel billets and rebar in an attempt to protect the domestic steel industry.
Although there is no official intimation from the authorities, the market participants have hinted that the import tax on billets could be around 5-10% of the value or a flat rate of USD 47/MT while rebar could be subject to 10-15% import tax. Also, it is not clear that whether this duty will be blanket duty similar to what U.S. has imposed on steel imports or it will be applied on a country basis.
Contrasting views
There are two contrasting views on the imposition of import duty on steel in Egypt. This is because one group believe that billet duties will facilitate an increase in domestic billet capacity while another group believes that the imports of rebar and not billet pose a greater threat to the country's domestic market.
In case of import duty on billet
Billet is a key feedstock for rebar production. There are rumors in Egyptian steel circuit that some mills in Egypt intend to invest in billet production and want to secure contracts with potential buyers. But the majority of Egyptian re-rollers are likely to resist any increase in import duties because it would lift their production costs.
There are around 27 re-rollers in Egypt and almost all of them are dependent on imported billet to produce rebar. Only around five steelmakers in the country have melt-shops to produce billet domestically, but they use their billet to produce rebar. If there is import duty on billets, the domestic industry would not be capable of supplying the market, a market participant added.
Egypt has the capacity for about 13.5 million tonnes per year (tpy) of rebar while its billet capacity is about 12 million tpy. Currently, Egypt mainly imports its billet requirement from CIS region.
In case of import duty on rebar
While Egypt does not have any import duty on billet at present, it has anti-dumping duties in place on imports of rebar from three countries including China, Turkey, and Ukraine since Dec'17. However, imports from Saudi Arabia and other Arab countries are not subject to any duty at the moment resulting which Saudi Arabia has been exporting billet and rebar to Egypt.
During Jan-Jun'18, Saudi billet exports to Egypt reached 35,000 tonnes compared with no exports in the corresponding period of last year whereas Saudi's rebar exports to Egypt reached 20,000 tonnes in the first six months of the current year against no imports in the first half of 2017, according to Saudi's customs data.
Domestic steelmakers in Egypt have been complaining about Saudi material arriving in Egypt at competitive prices, owing to lower production costs in the kingdom. Authorities could take special measures to stem the flow of rebar and billet from Saudi Arabia to Egypt, market participants said.
Egypt has introduced rebar import licensing in March 2016, which prevents unregistered exporters from shipping to the country resulting which local steel producers in Egypt increased their output and sales. Egyptian crude steel output increased to 6.46 MnT in January-October this year, up by 15% from the same period last year, World Steel Association data shows.
The final impact
In case Egypt imposes import duty on billet it will increase the cost of production for domestic rebar producers and decline in steel billet imports to Egypt could pressure Russian, Ukrainian and Saudi billet prices, as Egypt is a major billet export destination for all three producers. In the case of import duty on rebar, the prices which have been stable for most of the year may increase in the coming future.
The current retail price of Saudi Arabia-origin rebar I Egypt is EGP 12,100 per tonne whereas domestic rebar prices are unchanged at EGP 12,180 - 12,198/MT. All prices include VAT of 14%.
