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Egypt: Steel Industry 2010 - 2011
CI Capital Holdings, Dec 2010, Pages: 14
Feeder industries to Fuel growth > Prices rise compared to 2009 > Rebar Supply remains Tight > Flat steel production rises from the grave A review of 2010 and 2011 preview looking at the demand for rebars and flat steel and how it is changing. Drivers from international demand and changes in the local market with the competition from imports. As we p[review the sector we see rising consumption and capacity utilisation out to 2014 as it squeezes out imports in rebars and sees a regeneration of flat steel.
Rebar prices rose some 19% year-on-year in 2010 to average EGP3,657/ton, rallying after falling 19.4% in 2009. Consumption, on the other hand, lessened to 3.4mn tons in 1H10, down 19% on the year compared to the exceptional usage seen in 1H09 as a result of low prices. Nonetheless, producers increased their output in 1H10 to reestablish their market shares. Hence, imports’ share in covering local consumption declined from 45% to 16% in the first half. As for flat steel, improvements in global markets triggered the resumption of production at Ezz Flat Steel (EFS), which directs the majority of its output to the export markets. In an effort to both supply the expanding rebar market and reduce Egypt’s reliance on imported steel and billets, the government decided to offer new steel licenses in 2010. Additionally, EFS announced it would commence production of a billet caster at its factory, a move that will allow the company the flexibility to use its 1.3mn ton capacity to produce either flat steel or semi-finished rebars. Even though growth in rebar consumption is to normalize between 2011-2014, local production is to continue falling short of demand. As such, imports will remain a necessity in terms of covering local demand over our forecast period. This further underscores the fact that the rebar market is in need of even greater capacity than what will be added through the issue of the new licenses. For flat steel, we expect consumption to increase steadily between 2011-2014, fuelled by both growth in local feeding industries and the revival of global demand. This sub-segment will show little need for capacity additions, particularly after the 1.2mn tons of EFS capacity come on stream in mid-2012.
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