Market and product
Egypt Petrochemicals Report Q4 2010
However, some segments will fare better than others, with 4.4-5.6% growth in the construction sector in 2010-2014 likely to buoy up demand for PVC. Automotive production is also recovering, although it is likely to be 2011 before it outstrips pre-crisis levels. This should lift domestic use of engineering plastics, particularly PP which endured a lackluster performance in 2009. Additionally, the fertilizer segment has weathered the downturn well since agriculture has been among the least affected sectors in the global downturn. In the fertiliser sector, the country had ammonia and urea capacities of 7.52mn tpa and 4.32mn tpa respectively in 2009. Egyptian fertiliser producers will look forward to growth in the months ahead. Domestic and foreign demand - notably from India - will spur output.
H210 is likely to be more challenging than H110. Egyptian petrochemicals offer prices fell in Q210 compared with the previous quarter, but were still at a premium compared with other markets. BMI expected some market segments to tighten in Q310 due to maintenance turnarounds in domestic producers. Sidpec carried out a two week shutdown in HDPE production in July. It had planned to build up enough stock in high MI grade HDPE to meet contracts for HDPE film and blow-moulding until early August. However, the producer had struggled to shift production from low MI to high MI ahead of the shutdown, leading to a tightening in the segment. There were also reports that the producer was struggling with issues affecting low MI HDPE injection leading to limited deliveries. A two-week shutdown was also planned by PVC producer EPC, coinciding with the shutdown at Sidpec, which supplies its ethylene feedstock. However, it was confident that sales were not affected, with sufficient inventories to cover demand.
In 2011, the Egyptian petrochemicals market will be held back by relatively low domestic demand compounded by a downturn in demand in Europe, undermining Egyptian exports. However, the longterm growth prospects are good, assisted by government expenditure growth. We expect an average lending rate of 6.25% over 2011-2014 to boost up bank lending and increase the commercial banks' loanto- deposit ratio from its current 51% to 58% in 2014. With an increase in consumer spending only coming natural, alongside a growth in population (8.9% growth projection from 2009 to 2014), we see an attractive long-term outlook of the Egyptian economy. This should support the Egyptian petrochemical industry as it continues its expansion. The main risk comes from low-cost production from China and the Middle East.
In the long-term, the most dynamic downstream sectors will remain in plastics, an area that Egypt has only recently sought to expand in a meaningful way. Expansion in polymers capacities in 2010 should help ensure that Egyptian producers secure a share in that growth, although there are concerns of volatility in the short term.
Egypt is eighth in the Middle East and Africa Petrochemicals Business Environment Ratings, with 49.9 points, up by 0.2 points since the previous quarter because of an improvement in the country's institutional rating. The score has upside risks as a result of a more positive outlook from 2010 and continuing, albeit stuttering, progress on expansion of petrochemicals capacity. However, the country is unlikely to overtake South Africa and rise up the rankings any time soon.
(Source: www.officialwire.com)
