Today’s Trading Playbook
KEY THEMES
The Egyptian Competition Authority (ECA) approved placing caps over the utilization rates of 23 cement manufacturers. While the decision was suggested by these 23 companies, the ECA approval comes in view of the tough conditions the industry has been suffering from. Furthermore, the cut in capacity of each company will be according to a certain formula that takes into consideration each manufacturer’s total capacity, production line, and number of years in service. We note that the equation allocates the highest cuts to companies with more production lines as well as older companies. While the decision will help put a lid on the market oversupply, we believe the benefit of the decision will only come in handy if selling prices reacted proportionately to lower levels of excess supply. Compared to bigger players with higher capacities, we think small players will be the ones facing lower salability challenges and hence more capable to benefit from price hikes.
Now, on to the top news and analysis for the day.