Initial reactions from Egyptian players to austerity measures

According to the country’s local media sources, Egypt slashed subsidies and raised fuel prices by up to 50% and electricity prices by 26% within the scope of austerity measures taken in an effort to overhaul its fragile economy. The authorities also raised transportation fares by up to 20%, according to state-run news agency MENA.

Players were shocked by the extent of these price hikes as they were expecting more modest increases. They are now evaluating the possible impacts of the newly introduced measures in the long-run.

The market response has been restricted so far as many players are still away from their desks, with some of them bridging the whole week to the next Monday after the Eid holidays.

However, the majority of market players think that the reflection of rising costs will be hike attempts on the producers’ side. “Egypt’s Minister of Electricity has recently announced price hikes and producers are likely to increase their offers in accordance with the higher costs,” a source from one of Egypt’s local PP producers said.

In the distribution channel, meanwhile, offers for most polymers have already posted slight increases compared to the pre-Eid week, which were attributed to the rising fuel, transportation and electricity costs. However, trading activity remains stagnant given the lingering holiday lull.

A seller noted, “Players are not fully back in harness whereas PP and PE prices rose in response to higher fuel prices as well as further appreciation of the USD against EGP.”

A distributor said, “PP, PE, PS and ABS prices in the distribution market rose by around EGP200-400/ton ($11-22/ton) compared to the previous week given the recent increases in costs. Buyers are upset with the recent hikes we issued as their end-demand is not supportive.”

Several players projected, “Despite the recent hikes in the local market triggered by higher costs, we believe that players will continue to buy their basic needs given tight liquidity. Some players might elect to take a wait and see stance until a clearer picture is drawn while traders are also cautious as they are not confident about the upcoming period.”