Divergence grows between Egypt’s import and local PP, PE markets

In Egypt, major Middle Eastern producers rolled over PE and PP offers for May while foreign exchange shortage and restrained imports continued to buoy local prices despite lackluster demand. ChemOrbis Price Index suggests new all-time highs for local PP and PE markets in Egypt.

Mid-Eastern producers roll over May offers

In the import market, a Middle Eastern major’s new PP and PE offers for May indicated mostly rollovers from April. This was followed by consecutive rollover decisions from most of the regional suppliers for May. Noteworthy that import offers from the same producers indicated rollovers or up to $80/ton decreases through April. However, a set of import restrictions, which have been in place for months now amid a chronic shortage of foreign currency, have been a key factor in weakening demand for imported materials. “Lower deals could be obtainable for firm bids yet, buyers prefer to meet their needs locally amidst the ongoing import challenges,” a distributor remarked.

Local producers mostly hike prices for May

SIDPEC and ETHYDCO, the two local PE producers in Egypt, announced their new May PE offers during the first week of the month with moderate increases of EGP2,000-3,000/ton ($65-97/ton) as compared to April price lists. In the PP market, the local producer, EPP, kept their May offers unchanged from April while OPC prices indicated up to EGP4,500/ton ($145/ton) increases on a monthly basis.

Inflation spikes again, weighs on activities

A sinking currency and a shortage of foreign exchange remain a major hindrance to trade in Egypt. In its latest meeting last Thursday, the Central Bank of Egypt’s (CBE) Monetary Policy Committee (MPC) decided to keep interest rates unchanged despite the broad expectations of a surge in interest rates as a key tool to tame inflation. According to a monthly report published by the Central Agency for Public Mobilization and Statistics (CAPMAS) in May, Egypt’s annual headline inflation decreased to 31.5 percent in April from 33.9 percent the previous month. Despite the positive news, Egypt’s inflation data remains at a far more precarious level than last year. In April 2022, Egypt’s annual headline inflation rate was 14.9 percent.

Local prices continue hitting new highs

Despite soaring inflation and tight cash, local PP and PE markets maintained their upward trajectory, which had been in place since early February, as depleting local inventories and hampered imports supported the increase in pricing. During May, Egypt’s domestic PE markets increased by up to 6% while domestic PP markets rose by up to 9% on average, according to ChemOrbis Price Index. Accordingly, distribution markets continue to hit new highs on a weekly basis.

Will the disparity continue to grow through June?

Despite the new all-time highs, the rally in domestic markets seems to have lost some steam by the end of last week as restricted cash and recession woes continue to limit the overall trading activities in the country. Players are now waiting to receive new June prices from regional suppliers amid softer anticipations. These are based on weak global sentiment and lack of cost support. However, local prices are likely to remain elevated without a radical solution for the FX shortage problems.