Lower gas tariff for Egyptian industries to benefit DRI producers

Thursday, 03 October 2019 16:16:17 (GMT+3)   |   Istanbul
       

The Egyptian authorities on October 3 announced downward revisions in natural gas tariffs for local industries. In particular, the gas price for the steel industry has been reduced from the previously valid $7 per one million BTU to $5.5 per one million BTU to be applied according to the announced decision. Taking into account that the high input costs for steel production in Egypt have been actively discussed for many months and even became the trigger for the import billet safeguard introduction, the recent incentive is expected to somewhat ease the situation.

However, only local direct reduced iron (DRI) producers are foreseen to benefit from the gas price decrease. According to the market players’ estimations, with the $7 per one million BTU price the share of natural gas for the mills was at $77/mt or around 30 percent of the DRI production cost for mills. With the current gas price, the input cost of natural gas is estimated at $60.5/mt with a $16.5/mt reduction, SteelOrbis understands.

In the meantime, scrap-based producers in Egypt remain under pressure from high electricity tariffs which represents eight to nine percent of costs for the EAF route. “Electricity alone is more than $43-45/mt of cost and this cost is fixed whether the CIS billet price is $340/mt or $540/mt,” a local producer told SteelOrbis.


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