24 May 2013 16:59 [Source: ICIS news]
LONDON (ICIS)--Business in the Egyptian polyethylene (PE) and polypropylene (PP) markets is suffering as both government cuts to fuel subsidies and a lack of funds to import fuel hit industry, sources said this week.
“Now homes are running out of electricity,” a PE/PP producer said on Friday. “For the first time in Egypt’s history we face this kind of problem. All prices are getting high.”
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.
Government officials have attributed the frequent power outages during the last few days to a liquidity crunch, hindering the country’s ability to import fuel to operate power stations. And cuts to fuel subsidies are now starting to bite, according to reports.
With fuel subsidies costing Egypt around a fifth of its annual budget, the government plans to start reducing them from May. The intention is to cut expenditure to try to secure a $4.8bn loan from the IMF.
“We were having a technical problem in the first ten days of May,” the producer continued. “The factory shut down. The weak market didn't feel that until the first week passed, then sellers raised the price 500 [Egyptian] pounds till the factory started to work again, so June prices will be up.”
PP and HDPE prices would be unclear until the the electricity supply problem was solved, the source added.
Last month's bail-out, which saw the Central Bank of Libya deposit $2bn in Egypt's central bank, resulted in some relief in the PE and PP markets, but the impact was expected to be short-lived.
On 14 May a buyer based in Egypt said: “There is no [long-term] financial solution [for the country]. We just get money from people. There is material available in Egypt, but people are in a continuous panic.”
($1 = €0.77)
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