Global steel dynamics have been witnessing a recovery since early 2016, on the back of i) cuts in Chinese operating rates, given that the global excess capacity is predominantly domiciled in China; ii)  recovery in global steel spreading to more economic levels; and iii) introduction of antidumping duties on Chinese steel by Europe, USA and in Egypt. In Egypt, the market has been facing considerable pressure from a lack of working capital facilities post EGP floatation, given that the sector is well-banked already. We have Buy ratings on Egypt's steel sector for a cumulative capacity of 5.8mtpa for Ezz Steel and Ezz Al Dekheila's 3mtpa capacity (already consolidated in Ezz Steel). Both companies should benefit from higher DRI integration once working capital financing is made available to operate new DRI plant. We think that earnings growth stemming from higher DRI integration should be more accretive towards Ezz Steel rather than Ezz Dekheila, given that the latter is already fully integrated on a standalone basis. 
 
The steel sector in Oman was on a downtrend due to significant pressure from Chinese manufacturers until early 2016 and weaker demand; however, steel price have improved since then, due to the cut in Chinese production on environmental issues that favoured Oman steel producer, Jazeera Steel, which manufactures steel pipes and merchant bar mills. Recently, the company added rebars to its product portfolio and is expected to improve its capacity utilisation level above 60% over the next two years from the current 50%.