LONDON, May 29 (Reuters) – Egypt needs to impose anti-dumping duties to protect power-hungry industries including steel if the government reduces energy subsidies, one of its top steelmakers said on Thursday.
Energy subsidies are one of the most explosive issues facing Egypt’s former army chief, Abdel Fattah al-Sisi, whose victory in this week’s presidential vote will put a military man back in power in Egypt after the brief hiatus of Islamist control.
Cuts to energy subsidies, which account for 13 percent of the state budget, are seen as necessary by leading business figures to repair government finances.
But some are now saying they would need other protective measures if energy costs rise.
“I am pro cutting subsidies,” said Ahmed Abou Hashima, chief executive of Egyptian Steel, which expects to be the country’s No. 2 steelmaker by end-2015.
“The government has no money. We know this and we can make compromises, but at the same time Egypt must protect industry in order to attract investors,” he added in a phone interview.
Egyptian Steel has recently raised 5.2 billion Egyptian pounds ($727.25 million) from existing shareholders and loans from Egyptian banks.
It plans to use the money to expand annual production capacity to 3.5 million tonnes by end-2015 from 355,000 tonnes at end-2013, and to double the workforce to 5,000 people.
The IMF estimates that Egypt’s energy subsidies amount to seven times what it is spending on healthcare. A clear move to cut subsidies could restore confidence among investors, who have viewed successive governments as indecisive.
This investment, if it is directed towards the energy sector, could in turn stem the country’s blackouts. While this alone would help firms such as Egyptian Steel, Abou Hashima insists they would still need anti-dumping measures to prosper.
Abou Hashima cited imports from Turkey, the world’s top steel rebar exporter, as a particular concern.
Egypt’s trade ministry said late last year it was studying the possibility of imposing anti-dumping duties on Turkish steel imports, but there are currently no such tariffs in place, he said.
“Turkey has had (energy) subsidies since 1990, and they protect their steel industry. In Egypt today there are no anti-dumping measures of any kind in steel. If Egypt removes its energy subsidies, it must protect its industry,” he said.
Relations between Egypt and Turkey have deteriorated since the overthrow last year of Islamist President Mohamed Mursi, who had close ties with Istanbul.
Egypt’s Industry Ministry confirmed that no import duties were in place on Turkish steel but declined to comment on whether or not the government was considering such a measure.
“So far the minister has not made a decision on this,” a ministry official said.
According to steel industry body Worldsteel, Egyptian steel output fell at an annual rate of 8 percent in the first four months of this year to 2.05 million tonnes, after rising just 1.9 percent last year amidst the turmoil surrounding Mursi’s overthrow.
Even so, there are some positives for the industry.
Ezz Steel, Egypt’s top steelmaker, recently posted an 8 percent profit rise in 2013, citing an increase in private house-building and the former interim government’s two stimulus packages, each worth 30 billion Egyptian pounds.
“Egypt has potential. Almost two-thirds of our population is 30-years-old and under, and we are also the gateway to Africa, but we must start a revolution of work and production,” said Abou Hashima said.
Egyptian Steel, which was established by Egyptian and Qatari investors in 2010 by combining three existing firms, is planning an initial public share offering around 2016. ($1 = 7.1502 Egyptian Pounds)