Was the gov’t considering new cement licenses in FY2020-21? The government was planning to license new cement producers starting July despite a supply glut in the industry, according to a document breaking down the FY2020-2021 budget seen by Reuters’ Arabic service. A figure showing that the state expects to make EGP 620 mn next fiscal year from licensing appeared in the document that surfaced this week, despite having been absent from last year’s budget forecast. However, it seems like the plan was scrapped on the back of the covid-19 crisis, an official who spoke to us yesterday on the condition of anonymity said.

Background: Cement companies in Egypt have suffered through losses and shutdowns in 2019, which many blame on an oversupplied market. Annual production capacity ranges between 80-85 mn tonnes, while domestic consumption levels barely touch the 50 mn mark. Major private sector cement players told us that if the situation was not remedied by reducing supply and ending the fragmentation in the market, 2020 will be a worse year, particularly during covid-19. You can read more in this week’s edition of Hardhat.

So why were more licenses on the table? The government had based its projections on an expected boom in construction and was planning to issue the new licenses to ensure an adequate supply of low-cost building materials to pave the way for this boom, a source close to the matter said. The source told us that the government is considering scrapping the new licenses as covid-19 has changed projections.

The plan would have also seen new steel bar producers licensed to enter the market. The steel industry, like cement, has problems of its own. Small-scale rolling mills repeatedly threatened to halt production as they challenge the protectionist duties in place on iron billets, a key input they import. The tariffs were introduced last year at 16% for billets, with plans to be gradually reduced over three years, but the first round of the three-year plan to taper the duties was called off earlier this month to keep larger factories afloat amid the covid-19.