Egyptian steel recovers slowly from unrest

In the first four months of 2011, Egyptian crude steel production grew 6.6% y-o-y to 2.1mn tonnes, reports Business Monitor International Ltd (BMI). This follows 21.1% growth to 6.57mn tonnes in 2010, assisted by export growth of 77% to around 963,000 tonnes and 18% growth in domestic finished steel consumption to 8.37mn tonnes. However, compared with the previous four months, output was down 9.8%, hampered to some extent by civil unrest that began in January and its impact on the steel markets, production and logistics. At the same time, spot prices for steel products grew sharply as a result of the turmoil in Egypt, with construction steel reaching US$640/tonne in Jeddah, indicating Egypt's importance to regional steel markets.
While BMI anticipates a recovery over the rest of 2011, the early poor performance will ensure that output grows just 2% to 6.70mn tonnes. Sustained political stability will be crucial to the operation of the domestic steel industry as well as maintaining a market for output. Any strike action or curfew would pose further setbacks that could undermine the Egyptian steel industry's ability to repeat the strong performance of Q410. The disruptions to production and lower output growth levels are accompanied by a downward revision in BMI's GDP growth forecast from 5.1% to 3.2%. While the devaluation of the Egyptian pound meant that imports fell drastically, the resumption of port operations meant exports were quickly returning to normal, helping to restore sales.
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