The opening speeches and discussions made during the meetings of the Board of
Directors and General Assembly of the Arab Iron and Steel Union (AISU) held in Tunisia during June 2009 have focused on importance of cooperation of the Arab industrialists to face the crisis through which these industries are passing, in general, including the iron and steel industry which is considered one of the strategic industries closely connected with the economic development. This industry is usually the first one to be affected by the economic crises and the last one to get out of these crises caused by the economic cycle.
During these meetings a number of the significant issues related to the necessity of cooperation and coordination between companies have been discussed in order to face the future and also the necessity of setting up a long term strategy for this industry concentrating on the economies of scale and integration conception.
The speeches have also focused on the risks of the increasing imports from the world markets on the local production.
The following is a summary of the most important contents of these speeches and discussions made on the presented issues. Of the main speakers in these meetings were: Mr. Afif Shalabi, Minister of Industry and Energy and the other small and medium organizations in Tunisia, Eng. Ahmad EZZ, Chairman of AISU׳s Board of Directors and President of EZZ STEEL and Mr. Mohamed Laid Lachgar, AISU׳s Secretary General, At the beginning of the activities of this meeting President of the Tunisian El-Fouladh Company Mr:Ammar Shaib has welcomed participants and emphasized the importance of holding this conference in Tunisia.
Speech of Mr. Afif Shalabi
Minister of Industry and Energy and Small and Medium Organizations
Our meeting today comes within the framework of supporting partnership among the Arab countries in the steel industry which is considered one of the strategic industries worldwide because of its close connection with the economic development and one of the basic elements for identifying the competitive capabilities of the Arab industry and of improving its possibility in the world markets.
During the past period the Arab region developed the steel industry by completing important investment programs which included 97 projects to strengthen its production capacities but the difficulties resulting from the high prices of the raw materials during 2008 point to the necessity of multiplying efforts in the Arab region to reach the minimum production capacities responding to the development of consumption and making the industrial sectors and public works sectors protected against speculations.
We must now refer to the significant development at the level of the iron and steel production in the Arab region which reached about 39 million tons in 2008 and covered 80% of its requirements, while the Arab countries used to resort to importing most of their requirements in the recent past.
At the national level, despite the weakness of the available production capacity, the organizations of the sector are moving to complete additional investments for expansion.
It is expected that the second electric furnace of El Fouladh Company will be put into operation during the next months. This will double its production capacity of steel billets. Also a study to open the capital of this firm and looking for a strategic partner to develop its production capacity to meet the local demand has been commenced with.
Developing a Joint Industrial Strategy:
The world today is passing through a critical period characterized with the aggravation of the financial and economic crisis. So, we have become bound to set a realistic policy taking into account the new developments on the world scene in order to be fully prepared for the possible developments and for taking the necessary actions in due time to minimize the reflections of the financial crisis on the development march of the Arab region. We must exploit whatever the global economic crisis extends of opportunities to develop a joint industrial strategy based mainly on modernization and developing the competitive capability.
During the last decade Tunisia has seen a significant development in the mill industries sectors. The agreement signed between Tunisia and the European Union in 1995 was put into force since January 2008. The trade between us and this space has become free and with no administrative instructions.
In spite of bets and challenges posed by this agreement, it has, in return, provided wide prospects for the development of the Tunisian industry which could achieve positive results at all levels, of which, to mention, are the following:
- Development of many jobs in the mill industries sector from 210.000 jobs in 1987 up to more than 600.000 jobs in 2008, representing 20% of the active manpower.
- Development of the mill exports from less than one billion Euros in 1987 up to 7 billion Euros in 2008.
- Significant development of the value-added. It has become to represent 18% of the gross domestic product (GDP) against 12% in 1987.
- Development of the number of the foreign organizations, or foreign partnerships, is now more than 2.200 against less than 300 in 1995. Tunisia, in this regard, is considered the first compared to the counties of southern Mediterranean sea.
For more introduction of the Tunisian Industry, a strategic study for the year 2016 has been completed whose slogan is «TUNISIA LOOKING FOR GROWTH THING» Now introduction of its results is spread over the countries of the world. The industrial strategy aims at:
- Multiplying the value of the industrial exports. Our target is to achieve 16 billion Euros within 2016.
- Multiplying three times the value of the industrial investments to reach 1.5 billion Euros in 2016 against a half million Euros in 2007.
- Reinforcing diversification and improving the quality of the industrial products, concentrating in particular, on the electronic industries, technical plastics, industry of automotive and aeroplanes equipment and telecommunicating technologies, in addition to supporting the traditional sectors: textiles, foodstuffs, chemicals and phosphate sectors.
These goals may be achieved thanks to the continued support of His Excellency President of the Republic and continuation of achievements in the infrastructure and human resources which directly contribute to the development of the growth rates. I mention 5 technological and sectoral poles (communication technologies textiles, electricity, mechanics, foodstuff industries, textile industries) and preparation of 3000 hectares for industrial zones of which 1000 hectares are for the technological poles.
I wish to emphasize the role played by the Union in supporting the Arab industry, which is gaining more importance under the circumstances of the sharpness of the global financial crisis, especially that this organization has become more than ever in need of senergytic efforts to encounter the repercussions and impacts of this crisis, and take advantage of the opportunities it provides.
I am sure that this course will be able to deepen dialogue in this regard and come out with fruitful thoughts and recommendations in order to lift the posed challenges and support this organization under this difficult situation, enabling us to continue the desirable march of development at best conditions and be prepared to the after crisis periode, bearing important opportunities for the Arab establishment in promising sectors for which we have to do all the best to take advantage of it.
Speech of Mr. Mohamed Laid Lachgar
AISU's Secretary General
The Arab steel industry faces new dimensions on the international scene, which requires us to set a certain attitude to encounter many of the challenges which were not familiar to us before and which we will feel through the sequels of the global financial crisis reflected on the economies of all countries with no exception and on all industries – though the Arab steel industry and what it had faced of challenges was affected more than any other industry – because this industry is connected with the major real estate and infrastructure projects, the engineering industries and tubes and pipes industry.
All these projects were affected by the overriding financial crisis. Some of them were stopped, some were delayed and some others were cancelled – this was supported by the severe decline of oil prices. All these factors resulted in weakening demand for steel products. All of this did not come to stop at this limit. Most of the Arab markets have seen import of huge quantities of rebars from Turkey, especially into Egypt, where some published reports pointed out that the quantity of steel imported during the first quarter of this year accounts for more than 40% of the local consumption. This is an indicator that the Egyptian market has become one of the largest markets targeted by the Turkish products after the Gulf countries which had been targeted markets in the past period.
This represents a considerable damage and causes a big loss for producers. Not only the Egyptian market did not survive this import invasion, but also the other Arab markets have become targeted markets and this invasion will be more intense during the coming months for all the Arab markets with no exception.
The unfair competition occurring now in the Arab markets between the local production and imports has pushed some companies to cut down or altogether stop their production, especially with the increasing imported quantities, in addition to the fact that some of these steel producing companies had to reduce the local prices in order to be able to compete with the prices of the imported steel. This will also cause a considerable loss for them. At last, production will stop and shifting into imports will occur. The countenances of this trend are coming into effect in some Arab countries.
Therefore, it has become a must for us under such circumstances to endeavour to co-operate and coordinate with one another to face the future which has many challenges in store, through a unified strategy.
This must be one of our key objectives we are eneavouring to achieve. It is imperative now to read and analyze the situations taking place in the Arab markets, the continuation of which as such for a longer-than- expected time , though it is estimated for them to come to end by the end of this year, will certainly endanger the Arab investments in this industry. The indicators we get and the information coming to us emphasize that the import invasion has become to take the shape of dumping from some foreign countries supported by their governments by following a flexible monetary policy in order to allow exporters to sell in the foreign markets at prices below the prices of the local product in these markets.
The problem is not connected with only the long products. There are also huge investments in the production lines of flat products in many mills in the Arab countries, as most of the production of flat products is directed for export, which is about to be completely stopped due to the global financial crisis. This has resulted in shrinking production of the flat products in many Arab steelmaking companies. There are also companies which have entirely stopped the production lines of flat products, resulting in increasing the financial burdens on producers, represented in the huge investments of the production lines, in addition to the salaries and benefits of employees in the companies.
Thus, the analytical reading of what is going on now, and the future expectation of what will be coming should take a bigger part of attention of the Union. Proceeding from this conception, the board of directors had, in the previous meeting, made a decision about the importance of approaching the Arab ministers of trade and industry, not only to seek protection, but to keep them informed of what is going on around this industry, providing them with the precise information which includes pursuing and analyzing the trends of markets and whatever is going on, on the ground, especially that the current situations are completely different from the situations which were prevailing during last January. It is an imperative necessity to continue approaching the Arab ministers of trade and industry to keep them informed of what is going on in the Arab markets. Every country has to take what it deems fit of policies to stop the import invasion which is certainly affecting the national industry. It is also imperative to act to put the Arab industry on equal footing with the foreign industry in order to make it able to face the challenges and unfair competition of the steel products from the foreign companies.
Speech of Mr. Eng. Ahmed EZZ
Chairman of AISU - Chairman of EZZ Steel
The year 2009 is considered a difficult year for the steel industry. There are economic cycles through which all industries, in general, and the steel industry, in particular, pass. The first to be affected by such cycles is the steel industry and the last to come out of the crisis caused by such cycles is also the steel industry; this has been asserted by Eng. Ahmed EZZ, Chairman of AISU׳s Board of Directors during the discussions conducted in the meetings of AISU׳s General Assembly. AISU׳s Chairman of the Board reviewed the exceptional status through which the iron and steel industry passed, including the sharp decline of prices, in addition to the severe pressures to which the producing companies are exposed, forcing them to make decisions to cut down the volume of production, which reached 40% of the available production capacity in some companies. As a result, some capacities in a number of Arab companies have become idled.
Caution for the Future
The Chairman of the Board concentrated on the necessity to be cautions for the future, warning that things should not be taken optimistically. He said that the automotive industry will take time to rebound again and that the steel industry had seen a great growth over the last years. He added that the production of the Arab countries had seen an unprecedented boom, and the figures that are in our hands denote that the production in 2008 reached 23.5 million tons; it was expected to reach 24 million tons in 2009, except for the crisis through which this industry is passing. This crisis has also been accompanied with increasing imports, especially in the rebar market. Some foreign companies have drifted their exports to the Arab markets. So, why should not we have an organization like UNIFER, enjoying such an importance as all companies wishing to export to Europe have to consider their decisions. When starting to export any quantity to any European country, this organization will study the exported quantity and make sure whether or not it represents dumping of the European markets. In the Arab world, there are trading companies doing business in everything, be it steel or foodstuffs. This (sort of business) does not occur in any other country outside the Arab region. In addition, there are scattered Arab investments. Even the new investments are just small investments. There is no strategy agreed upon in the Arab countries to set up integrated projects, and the growth rates are not effected as required because thoughts are different and do not have a resemblance in the other countries in the world.
The investment pattern in The Arab world is made by personal and individual thoughts not helping to achieve the desired integration.
The Chairman of the Board pointed out that the first to pay for this scattering is the investor. We want investments assuming the macro economies and integration conception. There has to be a long-term strategy for this industry. For instance, if there would be 150 investors in the Arab countries, they should approach one another to achieve integration instead of scattering in setting up investment projects. The integration strategy is the optimal solution.
The Chairman of the Board also added that there are still some other important questions such as distortion of the customs regulations. There are Arab countries granting exemptions to non-Arab products, and other countries giving protection to the steel products. And there are some Arab countries which had signed agreements with the European Union or the United States of America. The problem is that the Arab product is not, in respect of treatment, on an equal footing with any European product from a certain country. He also added that the more the Arab markets are enlarged, the more there will be a good opportunity to market our products and, consequently, to help open the growth prospects for all.
Facing the Crisis:
Eng.EZZ has emphasized the role of the Arab Iron and Steel Union (AISU) which comprises more than 85 companies and said: « The Arab Iron and Steel Union (AISU) is one of the most important and oldest Arab business organizations» wishing to have all Arab steelmakers members in this organization. The need for such organizations gets stronger at the time of crisis when there is a pressing necessity to make available the information about the circumstances surrounding these crises and analyze the issues facing them, no matter whether they are general or special issues. He also concentrated on the necessity to have a collective thinking to face crises and, through this collective thinking, know the future prospects of this industry, stressing, at the same time, the importance of representing this industry before the international communities and the Arab decision-makers.