17 May 2013 13:21 [Source: ICIS news]
LONDON (ICIS)--Despite some improvement in business following a $2bn bailout from Libya last month, the outlook for the polyethylene (PE) and polypropylene (PP) markets in Egypt remains uncertain, sources said this week.
The 2011 political uprising in Egypt impacted both tourism and investment, damaging the country’s economy.
As a result, polyolefin business in Egypt has been hindered by a lack of foreign currency reserves needed to pay for imports of polyolefins and other products.
There has been some improvement following the last month's bail-out, which saw the Central Bank of Libya deposit $2bn in Egypt's central bank.
By the end of April, Egypt’s foreign currency reserves were reported by Reuters and the Financial Times to have stood at $14.42bn, having climbed from a decade-long low of $13.4bn a month earlier.
However this bailout is deemed by many participants as a short-term fix, and market insecurity persists.
“Egypt is still pretty slow because of the foreign exchange situation,” a Middle East PE/PP producer said on Wednesday. “The market is confused.”
On the same day a second Middle East producer of low-density polyethylene (LDPE) and linear low-density polyethylene (LLDPE) said: “There are currency issues with Egypt, but they’re a bit better this month. Demand is picking up in Egypt in May, but I’m not sure if the overall situation has improved.”
A PE/PP buyer based in Egypt said on Tuesday: “Yes, supposedly demand is better after the Libyan money, there’s been a stable exchange rate with the US dollar for the last week. [That will give] stability for some time.”
However, this appears to be just a temporary respite.
“There is no [long-term] financial solution,” the buyer added. “We just get money from people. There is material available in Egypt, but people are in a continuous panic.”
The source added that PE and PP prices are likely to increase as demand picks up, but this upturn coud be short-lived.
“The market will increase before Ramadan [as restocking takes place], then slow down. Two weeks from now until the middle of July, there’ll be high demand, but then it could go.”
The Egyptian pound has weakened by around 10% against the US dollar since the beginning of 2013, making it even more difficult to obtain imports.
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