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Egypt Petrochemicals Report Q1 2011
Business Monitor International, Nov 2010, Pages: 56
The Egypt Petrochemicals Report provides industry professionals and strategists, corporate analysts, petrochemical associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Egypt's petrochemicals industry.
Over the medium- to long term, leveraging Egypt’s petrochemicals future to its full potential still very much depends on attracting concrete multinational interest in its master plan, according to BMI’s latest Egypt Petrochemicals Report. Egypt’s demand for plastics is massive. Some 1.2mn tonnes of petrochemicals used to manufacture plastics are consumed by the local market each year – equal to more than 18kg for each citizen. Local production of these materials is around only 470,000tpa at present, meaning two-thirds has to be imported. Reducing this reliance on imported plastics is one of the main aims behind the petrochemical master plan.
BMI does not foresee an increase in domestic ethylene or polymers capacities in the next five years. While Carbon Holdings’ proposed naphtha cracker (900,000tpa ethylene and 400,000tpa propylene) with associated PE, ammonia and methanol units would significantly boost the petrochemicals industry, but we are not confident it will come online over the forecast period. Delays caused by the global recession, the financial crisis and Egypt’s volatile investment climate have undermined the country’s progress on petrochemicals. Consequently, the much anticipated expansion in polyolefins has not come about and Egyptian plastics converters will remain heavily dependent on imports.
In 2010, Egypt had ethylene capacity of 300,000tpa with PP and PE capacities at 200,000tpa and 225,000tpa respectively. We do not believe EHC’s proposed complex near Suez will come online by 2013, even if it does manage to secure financing in 2010. Similarly, it is doubtful that GAFI’s bid for foreign investment in a US$200mn PVC plant with a capacity of 120,000tpa and a US$150mn PS plant with a capacity of 200,000tpa will materialise before 2015. The EMethanex JV was due to be ready by end-2010. The original cost of the facility, which will manufacture 1.3mn tpa of methanol, was estimated at US$620mn. This has already increased to US$950mn. Once operational, the methanol plant will turn Egypt into a net methanol exporter. Other projects include EPPC’s new 350,000tpa PP facility at Port Said, which BMI believes should be fully functional in early 2011. The nitrogen-based fertiliser sector is also expected to expand, with EBIC and Agrim adding around 2.2mn tpa of ammonia production capacity by 2015. Meanwhile, a new VCM/PVC plant complex originally due to start up in February 2010 was delayed by TCI Sanmar, possibly to end-2010 or 2011. The VCM plant will have a capacity of 400,000tpa and the PVC plant will have a capacity of 200,000tpa that is scheduled to be doubled by 2012.
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. Around 70% of Egypt's exports, including products utilizing petrochemicals, are directed to the eurozone, which for the time being looks unlikely to see a strong recovery in demand, preventing a substantial contribution of trade to headline economic growth. A small pickup in exports towards Germany, France and Turkey will be counterbalanced by a decrease in the volume of exports to Southern Europe, particularly Italy and Spain.
BMI’s method of risk scoring in the petrochemicals sector is based on dynamic scores that reflect on future growth, as well as current capacities and the size of the internal market, along with investment risk assessments of the political, economic and regulatory environments. In the Middle East and Africa Petrochemicals Business Environment Ratings, Egypt is ninth, with 42.4 points. The score has upside risks as a result of a more positive outlook from 2011 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.
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