The Coke General Assembly decided “to liquidate the company because it was not feasible to continue but preserving the rights of employees”

6 September 2022
3:20 pm
Steel News

The Extraordinary General Assembly of Al-Nasr Coke Manufacturing and Basic Chemicals Company, affiliated with the Holding Company for Metallurgical Industries, decided, in its session held on September 5 2022, to dissolve and liquidate the company while taking the necessary measures in this regard and preserving the rights of the workers stipulated by law, in light of the memorandum presented to the Assembly regarding the feasibility of the company’s continuity.

The memorandum presented to the General Assembly included the study of the global consultant, and what was stated in the report of the Coke Company’s board of Directors in April 2021, about the poor technical condition of the batteries and the deterioration of the condition of all the company’s factories, equipment, machinery and buildings, and the suspension of Coke’s activity from August 7, 2021, and the report of the Environmental Affairs Agency on the incompatibility of the company’s environmental conditions with the provisions of the Environmental Law, in addition to the report of the Central Auditing Organization on June 30, 2022, about the existence of a fundamental doubt about the continuity of Al-Nasr Coke Manufacturing Company.

In this context, Eng. Mahmoud Esmat, Minister of Public Business Sector, directed that workers’ compensation should be a priority in liquidating the factory work.

The association confirmed the continuation of the work of the water plant/treatment plant in the Coke Company to supply the neighbouring factories, provided that the work will be carried out by technicians from the Coke Company and the use of technicians with expertise in the factories of the companies affiliated with the Holding Company, will be studied according to its needs in this field.

On the other hand, the company’s Ordinary General Assembly approved the amended business results of the El Nasr Coke Manufacturing Company, according to the notes contained in the Central Auditing Organization’s report, with a loss of 339.3 million pounds for the fiscal year 2021/2022.

The memorandum presented to the General Assembly of the Nasr Coke Manufacturing Company included the reasons and motives for the liquidation decision, including the following:

The issuance of Prime Minister’s decision No 1308 of 2020 to form a committee to study the reasons for the failure of the El Nasr Coke Industry, which recommended the use of a global consultant to express an opinion on the feasibility of the Company’s continuity and investment in it, as the Holding Company used the international consultant DMT and his study ended with an emphasis on the following points:

The investment costs for establishing two batteries to produce 1.8 million tonnes of coke amount to 644 million euros, in addition to the investments required to renew handling and screening equipment, which are estimated at 100 million euros, equivalent to a total investment cost of about 15 billion pounds.

The investment in the establishment of coking coal batteries for coke production is related to the presence of integrated production lines for the production of steel using blast furnace technology, where coke represents approximately 47% of the cost structure of iron production.
The study of the global coal markets indicates the extreme instability in the prices of coal and coke, as the price fluctuations reach 300%, increasing and decreasing, which makes any future financial expectations for this investment unreassuring and volatile. In addition, the existence of a stand-alone coal coking plant that is not integrated with a structure integrated steel production weakens its competitiveness in the market.
The mineral wealth in Egypt is free of coking coal mines, which requires the Nasr Coke Company to rely on raw material imports, which are in hard currency. One of the most prominent countries from which imports are made «is the United States of America, Australia, South Africa, and Canada. However, the high oil prices affect the shipping methods significantly.
Stand-alone coal coking batteries connected to integrated steel production lines are limited worldwide and established in countries possessing a considerable strategic stockpile in coalmines.
The global trend to preserve the climate and reduce polluting emissions, as the steel industry affects 7% of the total carbon emissions. Therefore, major steel production companies are studying the transition to using hydrogen to reduce iron ores instead of using coke under the name of the green steel industry, which is expected to spread worldwide within 15 years.
The produced quantities of coke are mainly for the local use of countries to meet the needs of blast furnaces and not for re-exporting or international trade.

In addition to what was mentioned in the consultant’s study, the decision to liquidate the Egyptian Iron and Steel Company on January 11, 2021, due to the decline in all financial, productivity and economic indicators, which is the main customer, and the absence of other steel companies that depend on the blast furnace technology and use coke in large quantities. This has negatively affected its production goals and resulted in the company’s products being sold in very weak and seasonal quantities.

Despite seriously considering directing the company’s entire production for export, it turned out that there is a very high sensitivity to price fluctuations, whether prices of coal (the principal input to production) or selling prices of the main product (coke), in addition to the Alexandria Port Authority’s demand to vacate the site on berths 61-64 that were used for exporting coke and located within the scope of the multi-purpose station construction project, the company dismantled the crane and handed the site over.

CAA notes:

In the report of the Central Auditing Organization on the financial statements of Al-Nasr Company for the Coke Industry and Basic Chemicals on June 30, 2022, there were indicators that had a fundamental impact on the company’s continuity in its current situation, including:

the exceptional period granted by the Presidency of the Council of Ministers to receive coal shipments, circulate and transfer to factories ended on May 4, 2021, without taking any environmental corrective measures.

To date, there is no approval has been obtained to receive the next coal shipments. The company has not submitted an environmental sanitation plan to obtain the Environmental Affairs Agency approval for the coal handling and use.

The lack of funding sources, the inability to determine the technical and economic feasibility of rehabilitating the third battery, and the continuation of heating the working batteries (the first and fourth) without producing natural gas, as the cost of the gas purchased from the Iron and Steel Company and used for heating during the current fiscal year since the cessation of Production in 7/8/2021 and charged at the expense of extraordinary losses amounting to about 127.3 million pounds.
Evacuating Alexandria Port of all equipment and handing over berths 63 and 64 at Qabbary Port on 26/06/2022.
Iron and Steel Company was the company’s primary customer, and its debt is about 430 million pounds, equivalent to 55.7% of the equity on 30/6/2022. The extraordinary General Assembly of Al-Nasr Company for Coke and Basic Chemicals ended on dissolving and liquidating the company and, taking necessary measures in this regard, was appointed as a liquidator for the company as of 9/5/2022 while preserving workers’ rights.