Egypt’s local PE, PP markets head north as pound plunges to new low

Local polyolefin prices in Egypt ended the first week of 2023 at firmer levels, largely in response to a plunge in the Egyptian pound and tightening availability inside the country. Although Egypt’s central bank moved to ease import restrictions and clear the backlog, import activities also remained restricted last week.

Third devaluation in less than a year

The Egyptian pound plunged to a record low on Wednesday last week, sliding as much as 7% to about 26.5 per the US dollar in the offshore market. Following that initial slide, it fell to a new low of 27.05 per dollar on Thursday. This marked the third devaluation in less than a year.

Import rule revoked amid massive backlog

The decline in the local currency came as Egypt works to clear an import backlog estimated at over $5 billion in December due to a letter of credit requirement imposed earlier by the Egyptian central bank. However, the central bank announced at the end of last year that it lifted the requirement for importers to secure letters of credit. By reversing the decision taken in February 2022, importers will be able to use documentary collection to bring goods into Egypt.

FX crunch continues to weigh on import activities

A shortage of foreign currency that made it difficult for importers to access letters of credit has been a key factor in restricting import activities. As demand for imported materials diminished, buyers instead focus on domestic market to secure their needs –albeit purchases have so far been hand-to-mouth.

Local producers hike prices for January

SIDPEC and ETHYDCO, the two local PE producers in Egypt, announced their new January PE offers last week with notable increases as compared to December price lists. Accordingly, SIDPEC’s new offers were higher by EGP3,000/ton for all grades while ETHYDCO announced EGP4,000/ton increases for HDPE film and HDPE inj., EGP5,000/ton for HDPE pipe (80) and EGP4,300/ton for LLDPE film.

Although new offers from domestic PP producers, namely OPC and EPP, were not confirmed at time of writing, expectations were for similar price increases for January.

Domestic markets also end week with increases

By the end of last week, domestic PP prices were assessed steady or up by as much as EGP3,000/ton as compared to the previous week. The local PE market also erased its losses at the beginning of last week and ended the week on a firm note, largely because of higher January offers from domestic producers, as well as hampered import activities and weakening pound.