The importation of steel billets used to manufacture the wire rod and the concrete reinforcing bar is now subject to a license. A measure which should protect local production. Sonasid, a listed player in the sector, will not be impacted by this measure, its general director informs us. The group will produce all of its tickets itself starting this year.
Billet is a material used in the steel and metallurgy industry, particularly for the production of wire rod and concrete bars sold to construction companies. On June 14, the Customs and Indirect Tax Administration published a circular informing that imports of billet will be subject to an import license.
This decision comes with the aim of protecting local production and ensuring a certain traceability of the origin of the billets. It should be remembered that a few local companies supply 70% of the market. The remaining 30% is provided by imports. It is this part which is the subject of the protection measure (import license). The conditions for issuing import licenses have not been clarified.
Better control desired over the origins of the billet
This measure, even if the contours are not yet fully explained, will aim to establish traceability of the billet entering Morocco, and to boost the local market in the face of foreign imports.
Contacted on this subject, Ismaïl Akalay, general manager of Sonasid, explains to us that “the authorities decided to put in place a license to import billet, because imports were generally made from countries that did not produce billet. Submit the importing a billet with an authorization will allow us to know its origin as well as its quality. This is important information because this data was unknown.
But the manager recalls that “this should in particular have an impact in the event of the implementation of a possible carbon tax”. For the moment, the conditions for issuing licenses have not been detailed, it is impossible to know whether there will be bans on the importation of certain types of billet or based on their origin. The future will tell.
On the stock market side, what are the operational implications for a listed operator like Sonasid?
Sonasid will become a billet producer this year
The side group is actually not affected by the customs decision and the license on the importation of billet. In fact, the group has been producing its billets at its steelworks for years, and imported a limited quantity of certain grades which it did not have. Thanks to its operational excellence plan, aimed at optimizing its production and reducing its costs, Sonasid will produce its entire billet from this year.
“There is a specific grade of billet on the international market necessary for the production of certain steels. Not being able to produce it in Morocco, Sonasid imported on average 40 to 60 Kt per year of this quality of billet. In the framework of the execution of our strategic plan relating to operational excellence, cost optimization and the development of high added value products, we had dedicated an investment of 5 million euros to enable Sonasid to produce for the first time in Morocco this billet”, explains Ismaïl Akalay.
The group opted for this choice in order to limit its costs. “We plan to start production of this billet this year. We also expect significant cost savings for this new grade produced by Sonasid compared to the imported one. In the future, with the exception of a few purchases made in a timely manner if the price comes close to that of scrap, we will not import any more.”
If a possible carbon tax is implemented, the group could, however, benefit from it due to its production mainly powered by renewable energies. “Billlets produced from ore from the Middle East in particular began to return to Morocco in a significant way. Today, we emit 400 kilos of CO2 per ton of billet produced, while imported billet produced from ore in emits 2 tonnes”, concludes the manager.
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