New Energy research report from Business Monitor International is now available from Fast Market Research
Boston, MA -- (SBWIRE) -- 12/09/2013 -- While the Egyptian market has been disrupted in the short-term by the uprisings, the long-term outlook for the country's refining and petrochemicals sectors looks positive, although delays are likely in planned projects. However, continued uncertainty for political leadership will upset the downstream projects that depend on foreign investment in increases in oil and gas supply. Violence in the country is pushing companies to provisionally stop local activities. If disruption were to continue over a long period of time, producers could decide to stop indeterminately their Egyptian projects.
Egyptian buyers have been turning to the black market, where the exchange rate is far less favourable -wiping out the gains achieved by the price reductions. As a result, when building in clearing and handling charges, new import offers are effectively more expensive than locally produced products, although the Egyptian market is still in deficit and highly import-dependent.
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Over the past quarter, BMI has revised the following forecasts:
- BMI has removed the Carbon Holding's project from the five-year forecast as we do not believe it will come onstream before 2019, which means a radical reduction of forecast petrochemicals capacities. Our medium-term forecast has seen ethylene capacity projections reduced from 1.66mntpa to 760,000tpa and PE capacity reduced from 1.58mntpa to 225,000tpa.
- If Egypt is able to overcome the political and economic crises, BMI believes that it will return to being a destination ripe for investment in petrochemicals, due to the potential in the domestic market, its trading relations with other markets in Africa, the Middle East and southern Europe, and the scale of its upstream resources.
- Petrochemicals using industries will struggle to return to pre-revolution levels of output. Vehicle output, a key consumer of engineering plastics particularly in the polypropylene (PP) segment, fell over 30% in 2012, despite the addition of completely knocked down assembly facilities for Toyota and Geely. On the back of closures of manufacturing sites and weakness in the wider manufacturing environment in the country, we estimate a 10% decline in total output in 2013. Downside risks to this remain prevalent and while BMI expects a return to output growth in 2014, it is unlikely production will return to 2011 levels in the five year forecast period. Nevertheless, the country will remain heavily import-dependent, particularly in the PP market, which will ensure that Egypt continues to be an export destination.
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