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Egypt’s local polyolefin markets surge on new import rules

by Başak Ceylan -
  • 22/02/2022 (07:38)
In Egypt, domestic PP and PE markets received a substantial boost from a decision taken by the Central Bank of Egypt (CBE). Official letters circulating online showed that the CBE has instructed banks to stop accepting documentary collection from sellers exporting to Egypt. Starting from March, Egyptian banks will only accept letters of credit for all import operations.

CBE announces exemptions to new import rules

Foreign companies and their subsidiaries were exempt from the new import rules, which were reportedly aimed at reducing foreign currency spending and protecting domestic industry. The CBE also allowed banks to accept invoices for goods that had already been shipped before the issuance of the decision.

Prospects of increased costs fuel prices

The impact of the CBE’s decision was felt immediately in the domestic market. Traders were confused by the sudden decision, which they thought would lead to increased costs. Several local distributors reacted by increasing their offers significantly over the previous levels, using the new import rules as leverage in price negotiations.

Egypt’s domestic markets have already been pressured higher by increasingly tighter supply conditions. And with players in the import market taking their cue from the oil complex, expectations for March are largely for increases. According to market players, new import rules fell on top of an already bullish market.

Local PE market up nearly 14% in two weeks

Domestic PE prices ended last week with increases of as much as EGP4,500/ton ($286/ton). “Supplies are short for nearly all grades and this is supporting the firming trend,” a manufacturer said while another confirmed that the new regulations imposed by the CBE accelerated the price increases.

New offers showed that gains extended into the week starting on February 21. According to ChemOrbis Price Index, domestic prices for LDPE film, HDPE film and LLDPE C4 film have increased by 13-14% on average from early February levels.

Domestic PP surges as much as EGP5,000/ton

A similar surge was seen in the domestic PP market last week on the heels of diminishing availability and higher replenishment costs. PPH inj. offers were up by as much as EGP5,000/ton ($318/ton) on a weekly basis while PPBC inj. and PPH raffia logged increases of around EGP3,500-4,000/ton ($223-255/ton). Following the additional gains reported so far this week, the weekly average of local PPH inj. and raffia prices stands 14% higher from early February levels.

Buyers move to sidelines amid price surges

On the buyers’ side, the reaction was almost muted. Activities were largely restricted to basic needs as most buyers struggled with cash flows and weaker-than-average end-product sales. “We are not sure how these increases will be absorbed. The recent increases have only managed to push buyers to the sidelines” a trader said. Although demand still looks unpromising, increases are expected to stretch into March amid the current cost and supply structure.
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