Ezz Steel has restarted the meltshop and rebar mill at subsidiary Ezz Flat Steel (EFS) after the commissioning of its new direct reduced iron plant provided competitively-priced raw materials.

The new DRI plant start-up has coincided with a reduction in natural gas prices for steelmakers in Egypt, allowing Ezz Steel to ramp up DRI production and reduce costlier scrap imports. EFS – whose electric arc furnace meltshop was closed throughout 2015 – operated at below 30% capacity utilisation last year. This is because Ezz Steel’s use of scrap as feedstock eroded margins and thus led to a reduction in crude steel output. EFS contributed to only 6% of Ezz’s net sales value last year.

EFS, which has hot rolled coil and rebar capacities of 1.3 million tonnes/year and 1m t/y respectively, is located in Ain Sokhna, 350km east from the group’s flagship Ezz Dekheila Steel (EZDK) plant. The launch of the new DRI plant, also at the Ain Sokhna site, means Ezz can “… avail the raw materials for EFS on a more profitable basis,” Ezz Steel tells Kallanish. EFS “… will be producing HRC and long products interchangeably and depending on market conditions for each product.”

Ezz reported a -10% on-year decline in consolidated steel shipments in 2015 to 3.8 million tonnes (see related story). Long product sales fell -8% to 3.44mt, as Ezz decided to maintain its market share despite weaker pricing. Flats deliveries, concentrated at EZDK, dropped -23% to 616,662t. The steelmaker sees the new DRI plant improving margins in 2016.

Egyptian investment bank Prime Holding said in January it sees EFS’ capacity utilisation rising to 70% in 2016, 75% in 2017 and 85% in 2018. Revenue meanwhile should grow to EGP 4.8 billion ($613.2 million) in 2018 versus EGP 1.3 billion in 2015. The new 1.85m t/y DRI plant is thus seen helping diversify the risk of Ezz Steel's dependence on EZDK as its main profit source. Ezz’s overall DRI capacity, including EZDK’s existing units, is now at 5.1m t/year.