Market Outlook: Egyptian styrenics reboot in progress

Prior to 2013, Africa was consuming primarily imported polystyrene (PS) from Europe and Asia. Egypt was the largest importer, with around 70,000 tonnes of PS entering into the country in 2012. Other North African countries took more than 50,000 tonnes.

Demand growth was strong – ICIS Consulting estimates African PS consumption increased by 4.5%/year from 2005 to 2013. This was driven both by growing populations and by increased affluence. Around 65% of African PS volumes go into packaging, such as cups, lids and food packets. More modern grocery channels, coupled with changing tastes, led to increases in demand for packaged foods. Other applications like electric appliances (particularly refrigerators) have also seen good growth.

In 2013 production was started at E.Styrenics, a public-private investment company. The plant at El Dekhila port in Alexandria has a capacity of 200,000 tonnes/year, producing both general purpose polystyrene (GPPS) and high-impact polystyrene (HIPS). A styrene plant was also planned in a second phase; in the meantime the plant would import styrene.

E.Styrenics planned to export 150,000 tonnes/year of product, with 50,000 tonnes/year of material remaining for the domestic market. This scheme was somewhat successful, with 87,000 tonnes exported out of Egypt in 2014. Most of this went to European countries.

However, in late 2014, something seemed to have gone wrong. Styrene monomer imports into Egypt largely halted by the end of Q3 2014. By Q3 2015, only 833 tonnes of PS were shipped out of Egypt.

There has been no official news of plant closures or idling. The most likely explanation is that running this business simply became uneconomical, due to rising styrene costs and other factors.

European styrene became scarcer from June 2014, when a fire took out the Ellba unit in Moerdijk in the Netherlands. A lack of foreign currency also meant that many Egyptian businesses were unable to pay for imported material. As a result, market sources believe that E.Styrenics was unable to pay for some shipments of styrene on time, causing some suppliers to end trading relations.

Finally, in January 2016 Turkey, a key market for E.Styrenics, imposed anti-dumping duties on Egyptian PS to protect its domestic industry.

SITUATION FINALLY IMPROVING

Now styrene availability in Europe is improving with the re-opening of Ellba.

In March 2016, the Egyptian government devalued the Egyptian pound by 13% against the US dollar. This may make imports more expensive but for E.Styrenics, some of this will be compensated by any resumption of PS exports to the eurozone.

Also in March 2016, a styrene supply contract was signed between E.Styrenics and a British firm, New Perspective, to supply 100,000 tonnes/year of styrene to Egypt, and the PS plant has restarted, albeit at low rates.

Sources claim New Perspective is part-owned by the Egyptian government, and there is also a clause to buy back some of the PS produced for distribution within Europe. However, converters in Europe are unwilling to rely on Egyptian supply with such an insecure outlook.

Mid-term, the main catalyst should be the establishment of a domestic styrene producer. A second producer, Carbon Holdings, has announced that it will build a styrene unit in Ain Sokna, part of the Tahrir Petrochemicals complex expansion. This unit will have a capacity of 400,000 tonnes/year. According to the company, the product will be used domestically for the production of rubber and plastics, offsetting costly imports.

We estimate that this plant will not be completed until 2020, and in the meantime the E.Styrenics PS plant could struggle to run at full capacity. In addition, political and economic uncertainty may continue.

However, with production at least resuming, we see a bright future for the Egyptian styrenics business.