Egypt to reap rewards as steel prices stiffen

Ezz Steel raises its price by 50 Egyptian pounds per tonne

Steel prices are on the rise again and the largest-listed manufacturer in Egypt is set to benefit. Ezz Steel raised its ex-factory price - the price the manufacturer has to bear - by 50 Egyptian pounds to 3,600 pounds per tonne yesterday to compensate for a tax hike levied on the steel it produces. With prices of raw materials strengthening in the international market, analysts say the rates of finished steel will remain on the upside for the foreseeable future, which should help the manufacturer's shares appreciate in value.

"The share movement triggers are the monthly price fluctuations and not so much the quarterly results announcements," said Rita Guindy, an analyst who covers commodities with EFG-Hermes in Cairo. "In April, share prices jumped after the steel prices rose by 25 per cent month on month and fell when the prices dropped the following month," she said. The Egyptian government lifted the sales taxes levied on steel producers from 5 per cent to 8 per cent effective at the beginning of last month.

Ms Guindy said Ezz's recent price hike did not fully offset the rise in sales tax and manufacturers as a result would be boosting rates higher in coming months. Low global inventories and rising demand for steel, both globally and regionally, could also help the cause of steel manufacturers and attract more investors. Ezz shares yesterday added 1.4 per cent to 18.3 pounds. They are already up more than 45 per cent from their 52-week low of 12.61 pounds but off close to 25 per cent from their peak in April, the month the shares gained in tandem with the rise in steel prices. "We expect the shares to start rising mid-August or September and hold the pattern," said Ms Guindy.

Steel prices have taken a hammering in the international and regional markets as construction activity, which is the main driver of non-oil regional economies, came to a halt. However, since the beginning of this year, prices have held steady. [e-mail]