The Egyptian Natural Gas Holding Company (EGAS) announced that it had submitted a report to the council of ministers explaining full details about the natural gas market. EGAS noted that the government would be incurring a cost of USD1mn per day if the gas was supplied to the industrial sector for USD4.5/mmbtu and that the sector’s demand represents 8% of the total gas supply in Egypt. The company noted that the average cost of natural gas consumed by the industrial sector, households, petrochemical sector, and automotive sector is about USD7.15/mmbtu. The report also mentioned that Egypt’s domestic supply of gas is about 4 bcf/d and that the government imports 1.3 bcf/d. The report added that power plants consume more than 90% of the domestic supply of natural gas. EGAS also mentioned that the cost of imported natural gas is USD7.6/mmbtu, and that the government buys domestic natural gas from the foreign partner for USD4.5/mmbtu, which brings the blended cost at USD7.15/mmbtu. The report also mentioned that current gas prices for all sector in the economy are already subsidised since it is supplied for the i) industrial sector at USD7/mmbtu; ii) households at USD1/mmbtu; and iii) power plants at USD3/mmbtu. With regard to Ezz Steel [ESRS.CA], the inclination of EGAS not to cut the gas price, despite other government sources stating otherwise, comes in line with our view that prices will remain unchanged at USD7/mmbtu on continued hesitation from the government's side. Nevertheless, we reiterate our view that upside risks are in place as DRI-integrated steel producer costs would be cut by USD25/tonne on the possible USD2.5/mmbtu gas price reduction. (Al Borsa, Ahmed Hazem Maher)   Ezz Steel: EGP7.72 as of 30 August 2016, Rating: Buy, FV: EGP12.00 per share, MCap: USD472mn, ESRS EY / ESRS.CA