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Egypt Chemicals Report 2009

Sep 01 2009 Pages: 0 Language: English Price: $1030

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Market Overview In the first half of 2008 the Egyptian chemicals industry recorded exports of US$10bn, representing growth of 47.5%, according to the Chemical and Fertilizers Export Council. This exceeded the target of 25% growth that was set by the Ministry of Trade and Industry in 2007. A key driver of growth has been pesticides, which increased by 77%, and plastic and rubber products, which increased by 58%. One of the reasons for the spike in exports has been the impact of government incentives. In 2006, Egypt began introducing subsides to support the export sector. For example, 30% of the export cost of plastic wrapping is now subsidised. However, since the end of H108 the global economy has tumbled into steep decline and the EU (Egypt’s main export market for chemicals) has fallen into recession. With demand dropping, we expect Egyptian chemical exports to have fallen sharply in the second half of 2008 and in the early months of 2009. Meanwhile, in 2008, the government removed tax benefits from petrochemicals firms, impacting competitiveness. Business Environment Egypt introduced a 20% tax on profits on foreign petrochemical companies in H208. They also have to pay almost twice the amount for their gas supplies as domestic firms. The legislation included the imposition of duty and a rise in prices for natural gas in Egypt’s free trade zone. This marks a radical shift in policy direction and could undermine foreign direct investment (FDI) inflows at a time when investors are reviewing their investments in the context of the global economic downturn and financial crisis. Projects, Expansions And Developments In August 2008, Canadas Agrium, a major retail supplier of agricultural products and services, sold its Egyptian project EAgrium to Egypts MISR Oil Processing Company (MOPCO). The approval of the EAgrium project, which was already under construction, has been revoked by the Egyptian Government owing to protests about its location near the NileDelta. Agrium held a 60% stake in the project, while Egyptian PetroChemicals Holding and EgyptGas held a combined 24% stake, Egypt Natural Gas held 9% and Arab Petroleum Investments held 7%. Industry Forecast Egypt’s trade and industry minister, Rachid Mohamed Rachid, has said that exports could fall by 10% in the 2008/2009 fiscal year as a result of weakening demand in key trading partners. Falling prices and volumes were particularly impacting sales of petrochemicals and fertilisers, he said. Indeed, prices in the industry have fallen by more than 50% according to Rachid, while demand has slumped by 20%. The majority of Egyptian chemical exports go to the EU, which is suffering a severe recession. In 2005, output of chemical products in Egypt was EGP23.28bn (US$4.06bn). It is forecast to reach EGP26.91bn (US$4.68bn) by 2009