Egypt Cuts Gas Supply to Ezz Steel by 30% as Major Steelmakers Reduce Output
Key Facts
Egypt’s government notified Ezz Steel, the country’s largest steel producer, that it would cut gas supplies by 30% starting November 8, equivalent to about 30 million cubic feet per day, according to a report published by EnterpriseAM on November 9. The report said no end date had been announced for the cut, tying the company’s output to an indefinite period of fuel rationing. In a report published by Al Manassa on November 10, the head of the Chamber of Metallurgical Industries said major producers, including Ezz, Suez and Beshay, had cut output by about 30% in response to reduced gas supplies. This leaves energy-intensive steel plants facing production cuts as the cost of imported energy inputs rises. The scope of the information differs between a specific notice received by Ezz and the production cuts among major producers reported by the chamber head.
A government official told EnterpriseAM that the cost of a spot-market liquefied natural gas cargo was approaching $120 million, and that the government had postponed five of the 15 cargoes contracted for November. This comes as the Asian liquefied natural gas benchmark known as JKM rose by about 36% month on month to more than $34 per million British thermal units at the end of October, compared with about $25 at the end of September. The increase raised the cost of securing gas on the spot market during the period in which the government took steps to cut supplies to factories. The cargo postponements also point to pressure on volumes available under November contracts, alongside rising benchmark prices. These factors help explain the government’s move to ration industrial supplies, though the report did not specify when the reduced volumes for Ezz Steel would be restored.
Supply pressures are feeding through to local product prices: Ezz Steel and El Marakby raised prices for reinforcing steel and flat products by about EGP 1,000 per ton from November 10, according to Al Manassa. The report linked the increase to cuts in gas supplies to energy-intensive factories and a stronger dollar, both of which raise production costs. International steel scrap prices have also recently risen from about $380 to a range of $407 to $410 per ton, an increase of nearly 10%. The rise in scrap adds to production costs as gas supplies contract and output falls among major producers. The price adjustment coincided with reported production declines, magnifying the impact of fuel rationing on the local steel market.
Hassan El Marakby said factories had little spare production capacity to absorb a further cut without operational consequences. He added: "Any cut below this current level would certainly have a negative impact on factories." He said some supplies could be replaced by importing scrap or direct-reduced iron, but that would increase foreign-currency needs. Ezz’s 2024 data show the scale of the company’s operations: it produced about 6.4 million tons of crude steel, against annual designed capacity of about 7 million tons, according to EnterpriseAM. The continuation of the cut with no announced end date makes production and supply planning an immediate concern for factories, while replacing part of the shortfall through imports remains tied to additional foreign-currency costs.
Some factories cut allocations to agents and distributors by between 20% and 35% and shifted from credit sales to payment on delivery, according to sources cited by Al Manassa. The report said contractors were struggling to secure reinforcing steel amid scarce supply. It also said an initial review by the Housing Ministry identified about 450 developers behind schedule, affecting nearly 15,000 projects or construction phases. The report cited concerns about delayed handovers amid steel shortages, linking disruption to industrial supplies with the availability of building materials for projects. These developments follow price increases effective November 10, while gas rationing and its duration remain direct factors in production and distribution.