AMMAN -- The government on Saturday said that it will not impose fees on construction steel coming from the United Arab Emirates, while local manufacturers insist that the industry is suffering due to "unfair" competition.
According to Emad Badran, director of the Jordan Steel Factory, local manufacturers cannot compete with imports from the government subsidised steel factory in the UAE which benefits from cheap energy resources.
"The government should impose more fees on these imports because the price of steel for end-users is lower than production cost at local factories," Badran said.
But Minister of Industry and Trade Amer Hadidi told The Jordan Times on Saturday that according to the National Production Protection Law, the ministry cannot impose any restrictions on such imports under the circumstances.
"According to the law, the ministry can only intervene when imports of any product are growing continuously for two consecutive years in a manner that causes a direct damage to local industries," he noted.
Acknowledging that local steel manufacturers are being harmed by imports from the UAE, Hadidi said that importing steel from the UAE started only a month ago when a $3 billion steel factory was established there.
He also indicated that according to the Greater Arab Free Trade Agreement, customs duties cannot be imposed on the flow of goods between member countries.
Jordan has been importing steel from European markets, which are subject to customs fees, therefore, competition was insignificant, according to local manufacturers
Electricity and fuel represent the heaviest burden for local steel industries in Jordan, which contribute more than 40 per cent of the production cost, Mohammad Kharabsheh, director of another steel factory stated.
"Production costs are higher than the current prices of the products [standing at JD450 now] by around JD20," he said.
President of Jordan Chamber of Industry Hatem Halawani told The Jordan Times on Thursday that there are over 10 steel factories in the country, providing jobs to around 8,000 employees,which are struggling due to the "unfair competition".
"The government has to support local industries by providing them with cheaper fuel prices and exempting production inputs from customs fees," Halawani said, adding that local steel factories import crude steel mainly from the Ukraine.
Factories in the country always improve their production efficiency in an attempt to reduce production costs but expensive energy resources remain the main obstacle, Kharabsheh indicated.
According to Kharabsheh, steel prices dropped by more than 60 per cent as a result of the global economic crisis after the price soared to more than JD1,000 per tonne.
The government's duty is to protect local industries, he said, citing protectionist policies "in several Western countries".
However, president of the Jordan Construction Contractors Association (JCCA) Dirar Sarayreh described the current competition in the local market as a "necessity" because it is in the interest of consumers and the answer to "monopoly".
Kharabsheh rejected the use of the term "monopoly" to describe the situation in the market in the past years because "there is actual competition between 12 local factories". He noted that the steel factories association that used to set the prices of the commodity was dissolved in 2003.
According to Sarayreh, the price of steel would be lower in the local market if Jordan imports the final product, but because the government wants to support steel factories, it imposes fees on imported steel from Europe, for example.
"Steel imported from the UAE provides balance to the market and current prices in the market are still high but not unreasonable," the JCCA head said, noting that domestic factories refused to lower their rates when international steel prices went down last year.
Meanwhile, Badran and Kharabsheh pointed out to some "unhealthy" practices by importers of Emirates-made steel, who, he said, do not set a fixed price, but rather always offer to sell at a price lower than locally produced steel, by JD20-JD30 per tonne.
Badran stated that factories in Jordan are currently struggling to survive.
"Sales at our factory, which employs a total of 400 people, reached JD26 million so far in 2009, but net profit did not exceed JD100,000 due to fierce competition and the collapse of steel prices," Kharabsheh said.
The ministry and the contractors insist that what is going on is fair play.
By Omar Obeidat
© Jordan Times 2009
