Egypt’s steel producers brace for US tariffs imports

Egypt’s steel exports to the United States jumped from $10.3 million to $103.3 million in 2017.
Sunday 01/04/2018
Trade concerns. Ezz Steel plant in Suez.  (Reuters)
Trade concerns. Ezz Steel plant in Suez. (Reuters)

CAIRO - Egyptian steel manufacturers are expecting tougher times ahead if the United States follows through with threatened protectionist measures against steel imports.

Steel exports almost doubled last year in Egypt, which benefited from a devalued currency and international demand, especially from the United States. However, a plan of the Trump administration to impose tariffs of about 25% will likely be greatly felt in Egypt’s steel exports, manufacturers said.

“The effects will be strongly felt here, especially if US President Donald Trump moves ahead in implementing his threat to protect the US steel industry,” said George Matta, the head of marketing at Ezz Steel, Egypt’s largest steel producer. “We had been preparing to pursue more aggressive marketing policies to increase exports to the US market.”

Egypt has sought to take advantage of a currency flotation to increase its exports, particularly steel. Exports have increased since the November 2016 flotation, which meant that locally produced commodities relatively decreased in price.

Egypt’s non-oil exports rose 10% to $22.4 billion in 2017 from a year earlier, the Egyptian Trade and Industry Ministry said. Steel exports jumped to $863 million in 2017 from $438 million the previous year.

Exports to the United States accounted for 11.9% of Egypt’s total steel exports in 2017. The country’s steel exports to the United States increased from $10.3 million to $103.3 million in 2017, accounting for 76% of Egypt’s building materials exported to the United States.

Egypt has 27 large steel factories, including Ezz Steel. The factories employ 150,000 Egyptians and an equal number of indirect jobs.

Trump’s plan to impose tariffs to protect US industry has concerned many exporting countries.

In addition to imposing a 25% tariff on steel imports, Trump’s plan includes a 10% tariff on aluminium imports. Trump accused trade titans, such as China, Brazil, India and South Korea, of unfair trade practices.

Egyptian steel manufacturers had hoped to increase exports to the US market, part of a nationwide plan to increase exports.

The Chamber of Steel Industries at the Federation of Egyptian Industries has had several meetings to discuss US protectionist measures since Trump mooted the tariffs in early March.

“Our steel and aluminium industries (And Many Others) have been decimated by decades of unfair trade and bad policy with countries from around the world. We must not let our country, companies and workers be taken advantage of any longer. We want free, fair and SMART TRADE!” Trump posted on Twitter on March 1.

Gamal Garhi, chairman of the Federation of Egyptian Industries, said the organisation prepared a report about the expected effects of the US plan and referred it to the Trade and Industry Ministry.

“We asked the ministry to make efforts to convince the US

administration to exempt Egyptian steel imports from the expected decision,” Garhi said. “Our factories will be spared effects from this decision if we get this exemption.”

Canada, Brazil and South Korea, which top steel exporters to the United States, will be hit the hardest.

Trump wrote on Twitter that the United States loses billions of dollars on trade with virtually every country it does business with.

Tweeting one day after his initial tweet, the US president did not send signs that he intended to back down. “Trade wars are good and easy to win,” Trump wrote. “Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore — we win big. It’s easy!”

One of the scenarios the US administration is considering is to impose a 25% tariff on steel imports. It could also institute a 53% tariff on imports from Egypt, China, Costa Rica, India, Malaysia, Russia, South Africa, South Korea, Thailand, Turkey and Vietnam.

Ezz Steel, which has a gigantic factory near Alexandria, was like other steel manufacturers in Egypt in looking to expand exports. Matta said exports to the United States could dry up completely because of the new tariffs.

“The tariffs will make manufacturers like us lose,” he said. “You cannot expect to make money in a country that imposes tariffs of 25% or more.”

Economists called on Egyptian steel producers to find other export markets to evade effects from the potential US plan. They said the reconstruction of Iraq and growing demand across Africa should provide steel producers with ample opportunities.

“Dependence on one market is risky,” said Farag Abdel Fattah, an economics professor at Cairo University. “Local construction material producers should seek alternative markets.”