Skip to content

Filter Options
Text :
Search Criteria :
Territory/Country :
Product Group/Product :
News Type :
My Favorites:
 

Egyptian polyolefin markets assess impact of new import rules

by Başak Ceylan - bceylan@chemorbis.com
  • 19/05/2022 (10:37)
The Central Bank of Egypt’s decision to reverse its rules requiring importers to get letters of credit (L/Cs) was welcomed by market players in a bid to improve supplies. However, players largely remained cautious amid a challenging macro-economic environment in Egypt.

What happened in February this year?

Banks in Egypt began informing importers of a Central Bank of Egypt decision that required letters of credit to buy goods starting from March. As per the central bank’s decision, dated February 12, documentary collection was no longer accepted by banks to facilitate the import of goods into Egypt.

The reaction from industry groups, including plastics and chemicals, was overwhelmingly negative and importers called for the move to be reversed. According to players, the decision would cause supply issues, and increase costs, leading to higher prices in the local markets.

L/Cs requirements contribute to inflated prices

Following this announcement in February, domestic prices for LDPE film, HDPE film and LLDPE C4 film increased by 13-14% on average in just about two weeks. A similar surge was seen in the domestic PP market and the weekly average of local PPH inj. and raffia prices stands 14% higher from early February levels.

Coupled with depreciation in the Egyptian pound and a bullish import pricing trend, the upward momentum in domestic pricing continued well into March. Although domestic markets fluctuated in mid-to-late April amid signs of a reversal in PE and PP trends, local prices continued to see support from restricted supplies and higher replenishment costs at the start of May.

Central bank reverses decision requiring L/Cs for purchases

In a statement announced on May 10, manufacturers, wholesalers, and importers of production inputs have been permitted to use documentary collection to facilitate the payment for imported goods. The decision came amid a challenging macro-economic environment in Egypt that has been exacerbated by recent economic and geopolitical volatility.

Traders welcomed the news as many small and medium size businesses faced challenges in banks due to insufficient institutional capacity for opening L/Cs.

Local PP, PE markets respond to decision

The immediate reaction in the market was cautious last week. However, this week local sellers largely cut their offers. Despite a lack of clarity on how to proceed with pending L/Cs, distributors felt uneasy and tried to conclude some deals at lower levels, particularly after seeing major Middle Eastern suppliers’ willingness to negotiate prices down.

PP prices saw decreases of EGP1000-4000/ton on a weekly basis while PE prices witnessed relatively smaller declines.

Players also voiced concerns regarding access to dollar liquidity. News on the local media indicated central bank officials were instructed to meet regularly with manufacturers to assess their access to hard currency needed to import production inputs. However, a shortage of dollar liquidity in the banking system remains a key concern for Egyptian market players.

Eyes on central bank’s interest rate decision

Although new import rules provided a welcomed respite, the volatile trajectory of USD/EGP parity continues to loom large on the Egyptian market. Another factor keeping the outlook blurry in the market is the central bank’s upcoming meeting on Thursday.

According to the latest polls, interest rates in Egypt are expected to rise by as much as 200 bps to combat rising inflation.
Free Trial
Member Login