New Report Available: Egypt Petrochemicals Report Q3 2013

From: Fast Market Research, Inc.
Published: Tue May 21 2013

The Egyptian petrochemicals industry is struggling with disruptions to natural gas feedstock while importers are suffering from a shortage of foreign exchange. Nevertheless, BMI still believes market potential will ensure current planned projects are realised; however, questions linger over whether the sector can continue to attract investment if the present political and economic uncertainties persist.

Start-ups in 2013 will focus on the polyvinyl chloride (PVC) and polyethylene terephthalate (PET) segments. In mid-2013, India's Sanmar Group plans to open a captive ethylene plant to serve its vinyl chloride monomer (VCM)-PVC chain, which produces 400,000tpa VCM and 200,000tpa PVC and is set to double in size in the future. Meanwhile, Egypt is set for a massive boost in its self-sufficiency in semi-finished PET products with the opening of a 430,000tpa PET chip facility in Q313.

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Ethylene capacity is set to rise to 1.66mn tonnes per annum (tpa) from 2016 (from the current 300,000tpa) on the back of planned projects, which look set to pick up as the civilian government achieves a more stable footing. This will support a significant expansion of PE capacity, which should rise from 225,000tpa to 1.58mn tpa over the forecast period.

However, a lack of fresh foreign investment could adversely affect the start-up of new companies in Egypt, and as a consequence this could impact the country's manufacturing sector and polyolefins demand. Meanwhile, the central bank's poor standing will also present difficulties for converters when they attempt to open letters of credit recognised by banks abroad, which are necessary to purchase polyethylene (PE) and polypropylene (PP) for import. Should this situation arise, it would have the effect of supporting domestic production, which is limited to Sidi Kerir Petrochemicals Company (Sidpec)'s PE production and PP facilities run by Oriental Petrochemicals Co (OPC) and Egyptian Propylene and Polypropylene Co (EPPC).

Over the past quarter, BMI has revised the following forecasts:

* Reductions in PE and PP import prices have been reported on the Egyptian market amid weakening domestic economic conditions as well as ongoing political disputes, which have created uncertainty. However, the price reductions were smaller than anticipated by market players and are largely outweighed by the effects of a lack of foreign currency, which has forced buyers to purchase US dollars at a higher rate on the black market.

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