RAFAH, Gaza Strip - The smugglers who sneak consumer goods, cash and weapons into the blockaded Gaza Strip have cut hundreds of holes in an underground steel wall Egypt is building along the border to try to stop them, two Egyptian security officials said Thursday.

Rare footage filmed by AP Television News before dawn Thursday showed one smuggler cutting through the barrier with a blowtorch. The smuggler, his face covered by a scarf, said it took him five hours to breach the obstacle.

Hundreds of tunnels running under the Egypt-Gaza border deliver consumer goods to the Hamas-run territory, bypassing a blockade imposed by Israel and Egypt three years ago. In recent weeks, Israel has eased its blockade by allowing most consumer goods into Gaza again through land crossings, and smugglers say they are more concerned about the competition from legitimate imports than about the wall.

Egypt started building the underground wall last year, in hopes of halting smuggling. In addition to consumer goods, the tunnels also deliver weapons and cash to the Islamic militant Hamas.

"We have hundreds of holes in the barrier, equal to the number of active tunnels," said one Egyptian official, who spoke on condition of anonymity because he was not authorized to brief reporters. He said the wall is to stretch along nine kilometres of border and is more than half complete. "It's a big failure," he said of the undertaking.

A second Egyptian official also said the wall had been breached in hundreds of places.

Tunnel activity has slowed in recent weeks, as smugglers try to gauge the impact of legitimate imports on Gaza prices. For now, many only smuggle those items still restricted by Israel, including cement, steel and other construction supplies.

Gaza economist Ali Abu Shahla said he believes market forces, not anti-smuggling campaigns, will close most tunnels in the end.