Egypt sees unprecedented hike in steel prices as impact of war in Ukraine ripples across economy

Three of Egypt’s biggest steel manufacturers announced that they have raised prices by up to 17 percent, or about LE3,000 per ton, in what an industry official described as the “largest one-time increase in steel prices in [Egypt’s] history.”

Ezz Steel, Egyptian Steel and Suez Steel Company announced the price hike on Thursday, coinciding with the start of Ramadan, a month that typically sees a drop in demand for steel, according to Mohamed Hanafy, the head of the metallurgical industries division of the Federation of Egyptian Industries.

The unprecedented price hike comes in the wake of Russia’s war on Ukraine, which has had repercussions across the global economy. 

“The price increase was essentially linked to higher costs of production on two levels,” Hanafy told Mada Masr. “Firstly, several production inputs that Egypt imports are scarce, including scrap metal, iron ore and billet. Egypt depends on imports from Russia and Ukraine, whose supplies have all but stopped globally due to the ongoing war. This leaves local manufacturers with the Turkish market, which prefers to supply Europe with such inputs.” Yet Europe has also felt the impact, with benchmark European steel prices surging 51 percent in the three weeks following the invasion, as shipments from Russia and Ukraine were taken out of the market, according to Bloomberg.

“Secondly, the higher costs of production and imports are linked to the increased price of the dollar in the local market,” Hanafy said. Two weeks ago, the Central Bank of Egypt raised interest rates by 1 percent across the board and allowed the value of the pound to free-float against the dollar in a bid to confront rising inflation and foreign capital flight exacerbated by the war in Ukraine, leading to a 14-percent drop in the value of the pound against the dollar.

The impact of the crisis and government measures implemented to confront it have already reverberated across Egyptian industries. Publicly traded stocks of steel and cement companies fluctuated last week amid news that the government is preparing to hike the price of the subsidized natural gas it sells to these sectors.

Increases in production costs of construction materials are bound to affect the domestic real-estate market, according to Fathallah Fawzy, chair of the Construction Committee at the Egyptian Businessmen Association, who added that most real-estate developers are already raising prices by 15 to 20 percent in response.

If the impact of the war in Ukraine continues apace, the steel market could undergo further price increases after Ramadan as demand rises again, according to Hanafy. In that case, real estate developers should be expected to increase selling prices once more, Fawzy warned.

In addition to the central bank decisions, the Egyptian government has taken several emergency measures in an effort to mitigate the economic fallout exacerbated by the war, including fixing unsubsidized bread prices and announcing a series of stimulus and social security measures.