"Egypt Petrochemicals Report Q2 2016" is now available at Fast Market Research

While Egyptian market growth experienced some slowdown in 2015, the local petrochemicals industry managed to defend sales and even hike prices in Q4 due to the depreciation of the Egyptian pound and disruption to imports. The industry is likely to experience sustained growth as domestic capacities expand. However, upstream resources need to be secured for the petrochemicals industry to be taken to the next level.

Egypt is one of the most promising growth markets for petrochemicals and in spite of infrastructural and feedstock constraints it is set to become a significant exporter of petrochemicals over the long term. Plans will be put into operation in 2016 for a series of new plants over the next five years, culminating in Carbon Holdings' world-scale Tahrir Petrochemicals project, which is set to come into commercial operation in 2020.

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While local production is benefitting from a weaker exchange rate and import difficulties, it has not escaped a squeeze on margins as cost pressures have risen. In spite of a lack of US dollar liquidity, lower prices overall and electricity supply problems, Sidi Kerir Petrochemicals Co (Sidpec) was expected to sustain sales at EGP3bn in 2015. However, unaudited financial statements by Sidpec showed that company's profits declined by 8.5% year-on-year (y-o-y) in 9M15 to EGP664.98mn.

Among Sidpec's USD670mn of planned projects are a rise in production capacity of its butane unit by 32% as well as projects to increase the added value of ethane/propane mixture, which is produced by United Gas Derivatives Co. Meanwhile, MOPCO Fertilizers' first production line was set to come into commercial operation in 2016, adding approximately 650,000 tonnes per annum (tpa) of nitrogenous fertilisers to production. A second line is due to be operational by the end of the year.

A strong fixed investment drive supported by Egypt's government along with a recovery in consumer and industrial activity will boost the petrochemicals industry and market growth and over the rest of the decade. Automotive output and construction activity are set for sustained growth, which should help boost consumption, although the car industry is seeing a slow recovery from a slump in 2014.

In BMI's Petrochemicals Risk/Reward Index for the Middle East and Africa region, Egypt is in eighth place with a score of 49.3 points, up 0.7 points since the previous quarter as a result of the ongoing improvement in the investment and economic environment. The rapid return of investment in recent quarters has seen the country's upstream rewards scores begin to recover. The increase in its score has enabled it to pull ahead of Turkey in the regional ranking, putting it 2.2 points ahead of South Africa and 1.3 points ahead of Turkey, with considerable upside for further improvement.

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