Investment Opportunities in Egypt's Steel Industry

Investment Opportunities in Egypt's Steel Industry
Egypt is the second largest pig iron producer in Africa, accounting for 10% of the total output of pig iron in Africa. Egypt produces about 11 million tons of steel products every year, including 1.1 million tons of rebar, 2 million tons of steel plate and 600000 tons of other steel, including stainless steel, with consumption reaching 7.3 million tons.

Egypt Steel Industry Development Background

Egypt's steel industry started in the 1940 s, and its development was based on the use of scrap resources left over from World War II-first melting scrap into molten steel in a steelmaking furnace, then pouring it into molds by artificial casting, and finally rolling into steel bars. Until the introduction of electric arc smelting furnace and continuous casting equipment, the Egyptian steel industry has further developed.

By the end of the 1950 s, the first complete plant had been established in the Aswan area, using blast furnace technology and equipment imported from Germany to smelt iron ore (of poor quality and high impurity content) mined in the Aswan area with imported coke. Mainly iron ore is refined into liquid steel, artificial casting into the final steel products. The development and growth of the Egyptian steel industry has gone through many stages, the most important of which is the introduction of foreign capital. After Egypt introduced relevant technology and equipment from Russia, in the early 1980 s, local enterprises in the Dakhera region of Alexandria Province also began to make joint investments with Japanese enterprises, and adopted new steel production technology, using natural gas instead of coal, reducing imported iron ore into high-quality raw materials, producing sponge iron (iron content> 90%), and then smelting through electric arc furnace, And rolled into the final product.

The iron and steel industry has been developing steadily and rapidly with the social and economic development and the national large-scale development plan. Many investors have been involved in the steel industry, from imported billet rolling projects, to smelting, production of billet companies, as well as the production of flat steel rolling companies, a wide variety, both for the Egyptian domestic market, but also exported to other regions.

Major Iron and Steel Enterprises in Egypt
There are not many steel producers in Africa, mainly in Egypt and South Africa. Egypt accounts for 5 of the top 10 steel producers.

Egypt's steel industry has developed relatively fast. It is one of the few countries in Africa that can produce rebar, with a production capacity of 8 million tons/year to 10 million tons/year. Most of the steel companies are located in Suez, Port Said, Alexandria, Mnufiya, Cairo, Eastern Province, Qualibia, Giza, Minia, Benisuf, Ashu, Aswan and other regions.

Types and Operation of Main Iron and Steel Enterprises in Egypt

Egypt Steel Plant Capacity List (Unit: thousand tons)

At present, Egypt's steel production capacity is about 1000 million tons, of which 70% is used for real estate and 30% for major infrastructure. In addition, in recent years, steel structure, machinery, equipment, household appliances, steel pipes, threading and bolts and other industries are also developing steadily. The emergence of these new demands will further stimulate the development of the Egyptian steel industry.

Investment Opportunities in Egypt's Steel Industry

At this stage, the Egyptian steel industry still has great potential for development, which is reflected in two aspects:

(1) In recent years, the Egyptian government has actively promoted social and economic reforms, increased investment in infrastructure construction, and improved the industrialization level of domestic enterprises. These measures will directly or indirectly stimulate the demand of the steel market and maintain a stable growth trend.

Suez Canal Corridor Plan: In March 2015, the Egyptian government officially released the Development Plan of the Suez Canal Economic Zone in Egypt. It plans to build the Suez Canal Corridor where the cooperation zone is located into an international industrial, IT electronics, and logistics park. Industrial parks in various fields such as shipbuilding and navigation, plan to build railways, airports, ports and other infrastructure, and develop a number of high-tech engineering projects, this will drive the investment and development of steel, building materials, construction machinery and other industries.

Egypt's New Capital Plan: In 2015, the Egyptian government officially announced the new capital plan, which will establish a new administrative capital covering an area of more than 700 square kilometers and accommodating 5 million residents in the area between Cairo and the Red Sea. It is expected to cost 45 billion US dollars. At present, China Construction has won the bid for the first phase of the CBD project in the new capital central business district, with a total amount of about US $3 billion. In addition, CBD Phase II China Construction has also signed a framework agreement with a total investment of about US $3.5 billion.

(2) According to data from the Egyptian Ministry of Trade and Industry, the annual growth rate of steel demand in the Middle East will exceed 10% in the next ten years. Neighboring countries such as Iraq, Algeria, and Sudan are in the process of rapid development. This is for Egypt to establish export-oriented steel. Enterprises provide good opportunities.

Data show that in 2016, the apparent consumption of steel per capita in Africa was about 28kg, and the apparent consumption of steel per capita in Egypt was about 125kg, which was 13% and 55% of the world's per capita steel consumption respectively.

The growth in demand for steel and steel structures in Africa is mainly driven by infrastructure investment. The data shows that between 2000 and 2012, infrastructure investment in sub-Saharan Africa increased by 77%, while steel demand in Africa increased by 288 over the same period.

Investment advantages of Egyptian steel industry

Yin Haiwei, a doctoral student at Nanjing University, uses publicly published data from relevant international organizations, and uses a more comprehensive index system and a more objective data processing method to conduct a comprehensive quantitative evaluation of the investment environment of African countries. The results show that Egypt's investment environment is excellent. Egypt is in the middle and upper reaches of the world's developing countries, in the forefront of African countries, and the level of infrastructure and science, education and culture are also in the forefront of African countries.

(1) Multilateral trade: Egypt has signed a number of bilateral or multilateral trade agreements with the United States, the European Union, the Middle East, Africa and other major economies in the world.

Egypt signs Greater Arab Free Trade Area with Middle East

Egypt signs free trade agreement with Turkey

Egypt signs COMESA agreement with Africa

Egypt signs partnership agreement with EU

Egypt signs agreement with US on qualified industrial zone

Egypt signs Agadir agreement with Morocco, Jordan and Tunisia to establish free trade among the four countries

(2) Location and logistics

Egypt across Asia and Africa, across the Mediterranean and Europe. The Suez Canal in Egypt is a major transportation hub for Europe, Asia and Africa, connecting the Red Sea and the Mediterranean Sea, the Atlantic Ocean and the Indian Ocean. Egypt has a coastline of about 2900 kilometers and 15 commercial terminals. It has sea and air routes connected to European, Asian, and African countries, as well as a land transportation network connected to neighboring African countries. It has convenient transportation, superior geographical location, and transportation cost advantages. Obvious. Products produced in Egypt with inland transportation can easily radiate the Middle East, Africa, and Europe.

(3) Mineral resources

Egypt metal minerals are mainly iron, manganese, rare metals, followed by gold, bauxite, zinc, lead, copper and so on. Egyptian iron deposits are mainly located in sedimentary rocks in the northern Bahariya oasis and southern Aswan regions of the Western Desert. Among them, the China-Pakistan Harya Iron Mine is the most famous. The iron ore grade is low, but the reserves are large, and the surrounding infrastructure is relatively good.

(3) Tax policy

The TEDA Cooperation Zone is located in the Suez Canal Economic Corridor in Egypt. It is a special economic zone and enjoys the bonded and tax-free policies in Egypt's Special Economic Zone Law No. 83. At the same time, the Suez Canal Economic Zone is defined as a Class A investment area in the Investment Law No. 72, Enjoy corresponding preferential policies. (See TEDA Q & A- Policy for details)

(4) Energy supply

Egypt's power generation capacity has ranked first in Africa and the Middle East. The power grid basically covers the entire territory. The energy structure is mainly gas-based, and hydropower, wind power and solar energy account for a small proportion. In the 2017/18 fiscal year, the installed capacity was 54.45GW.

China-Egypt TEDA Suez Economic and Trade Cooperation Zone Production Factor Cost

(5) The labor force

Egypt is a populous country in the Middle East, and it is also a country with abundant labor resources. Currently, Egypt has a total population of nearly 0.1 billion and a labor force of more than 29 million.

In March 2019, the Egyptian government announced that the minimum wage will be raised to 2000 Egyptian pounds per month (approximately US $116) from July 1. Take manufacturing enterprises as an example: the salary cost of ordinary labor force is 2,000-4,000 Egyptian pounds (including social security and taxes), the cost of skilled workers is 4,000-6,000 Egyptian pounds (skilled workers with certain technical content), and the salary of higher-level Chinese translation is 7,000-12,000 Egyptian pounds. The salary of ordinary managers (accounting, human resources, logistics customs clearance and other positions) is 3,000-5,000 Egyptian pounds, and some enterprises with better benefits can reach 5,000-8,000 Egyptian pounds.

Establishment of investment approval process for steel projects in Egypt

If the enterprise needs to carry out the whole process of production, it needs to obtain separate licenses for steelmaking, steel rolling, coking and other links. The overall project investment process is as follows: