Interview: Ahmed Abou Hashima
What are your expectations with respect to short-and medium-term demand for steel?
AHMED ABOU HASHIMA: No matter what is happening on the political and economic fronts, there is always a high demand for steel, and these last five years have shown the resilience of the Egyptian economy.
The new capital alone will have a huge impact on the steel sector, in particular through a rise in demand. Other real estate projects announced by the government and the private sector will also raise demand. This will positively affect steel and construction materials in general. We already have a shortage of approximately 8m housing units as well as a need for other infrastructure in the country, all of which requires steel. With the population growing by around 2m people each year, there is likely to be continuous demand going forward.
How is the steel industry coping with the rising prices for electricity and natural gas?
HASHIMA: Securing the energy needed to operate steel plants has been a significant challenge. For instance, we paid roughly LE450m ($61.3m) to secure energy flows at peak hours. Nonetheless, rising energy prices have been tackled, in part, through charging higher prices for steel. The government is also encouraging the use of renewable resources to generate solar and wind power, as well as eco-friendly coal power plants, which will partially solve the issue. The government has declared that power generation will gradually be added to the national grid, which should reduce the energy gap by the end of 2015. In addition, some of the deals signed at the Egypt Economic Development Conference will massively increase power generation capacity. The Siemens deal, for example, will boost capacity by 6.4 GW, with 4.4 GW generated by a power plant in Upper Egypt and 2 GW by wind power, which is equivalent to almost one-third of current capacity. By 2020 Egypt will also be able to narrow the gap between the export and import of natural gas.
How effective are the 2014 temporary tariffs?
HASHIMA: They did not make much difference, as the protection fee was 6.38%. Chinese rebar is subsidised for export at 18% by the government in Beijing. Turkey, meanwhile, which is a key competitor, imposed 40% duties on Chinese steel. The solution is to have an import quota in Egypt combined with a 20% duty on imported steel. That is the best way to protect Egypt’s steel industry, which has LE100bn ($13.6bn) of investment and employs 80,000 workers.
In what ways can eco-friendly practices within the steel industry be further incentivised?
HASHIMA: It is crucial for local factories to use the latest steel production technologies. This depends on constant charging of scrap in electric arc furnaces with no hatch opening, which ensures positive effects such as shortening the time for melting, saving energy and controlling emissions harmful to the environment. This can limit negative consequences for the national grid. External organisations can also assess the impact of the steel industry on the natural environment, such as managing the installation of dust and smoke treatment units to maintain a clean environment at factories.
What are the opportunities for steel exports?
HASHIMA: At present, the industry is working on how to meet local demand, and the priority is to address demand across the entire country, with excess production dedicated for export. Exportation is only possible once plants in the country are fully operational. In the short term, MENA will be the most promising export market. Studies have to be carried out to determine which African country has the best investment atmosphere, gas prices and skilled labour.
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