North Africa steel: Weakness persists

The North African steel industry faced issues related to Covid-19 and oil price lows throughout June. Egypt was the worst impacted economy, market participants said, followed by Algeria, which has a significant oil-based economy.

Algeria

The Sider El Hadjar steel complex faced financial and operational difficulties in June but steelmaker Algerian Qatari Steel (AQS) has now returned to activity after a down period.

Alongside Tosyali and some smaller re-rollers, offers for Algerian domestic rebar are around 64,750 dinars/t ($502/t) ex-works, up from AD63,250/t ex-works at the beginning of the month. This does not represent a recovery in the industry, market participants said, but rather an effort to capitalise on the recent rally in global rebar prices. The Argus daily Turkey rebar assessment rose by $17/t from 1 June to $420/t fob on 12 June. But the gains have already started to dissipate, with the assessment slipping to $409.80/t yesterday.

As a result, at least one mill is looking to the export market rather than focusing on domestic sales. It offered rebar to northwest Europe this week at $450/t fob.

An ambitious road project that has been in the pipeline for 50 years, linking Algiers with Lagos, Nigeria, has given mills some cause for optimism recently. A critical part of highway in the Chiffa Gorge in Algeria is set to be delivered in the coming weeks, paving the way for a 4,500km motorway to be rolled out. Around 2,500km of the motorway is to be situated in Algeria and the government is set to push for AQS and El Hadjar material to be used in the procurement process.

But market participants are sceptical about the the project's completion. "Tensions and disputes in the region, out of control trafficking and smuggling across borders, terrorism and visa issues will seriously weigh on the viability of this project," said one trader in Algeria.

Egypt

Pessimism abounded in the Egyptian market in June. May's purchasing managers' index number was 40.7, an improvement on April, which saw a fall to 29.7, but confidence is lacking in the Egyptian steel sector.

Steel production in May dropped to 628,000t compared with 651,000t in May 2019, meaning capacity utilisation was around 94pc compared with about 98pc in May last year. But production is up by 0.7pc on the year in January-May to 3.5mn t, according to Industry organisation Worldsteel figures.

A major direct reduced iron mill is offering rebar at 9,750 Eyptian pounds/t ($604/t) ex-works, while other mills are offering at E£9,500-9,550/t ex-works, a marked change since 2019 when prices largely remained above E£10,000/t ex-works. But an Egyptian mill offered wire rod in coil to Saudi Arabia at E£7,830/t cfr.

Morocco

Moroccan activity has been relatively thin this month with much of the country's billet purchasing coming from southern Italy, where Covid-19 measures have brought prices down to competitive levels.

It is favourable for Morocco to buy from southern Europe given proximity and lack of duties. CIS material is subject to 2.5pc duties, while Turkish sellers pay 1pc duties on billet exports to Morocco.

The latest billet sale to Morocco was heard last week at €360/t ($403/t) cfr for European origin billet.

Tunisia

A Tunisian mill purchased a cargo of billet from Brazil this month at $385/t cfr Sousse, a low price that undercut Black Sea material.

But appetite for billet is still lacking and Tunisian re-rollers have been largely out of the market this month, with very few enquiries heard. Tunisian buyers now expect steel prices to fall in the coming weeks and are comfortable holding off before purchasing more billet, a Tunisian trader said.

Prices for domestic rebar in Tunisia were heard at around 1,567 Tunisian dinars/t ($550/t) ex-works today.

By Sara Warden