Egypt Petrochemicals Report Q4 2009

Egypt Petrochemicals Report Q4 2009

While Egypt’s economic performance is set to deteriorate, it is still better than many other markets, with
petrochemicals demand expected to grow albeit at lower rates than in previous years, according to BMI’s
latest Egypt Petrochemicals Report.
The rate of economic growth is forecast to fall from 3.7% in 2009 to 1.8% in 2010, implying a further
slowdown in demand for petrochemicals related products in 2010 before accelerating from 2011. Of the
sectors that have most direct impact on the industry, construction is faring the worst, with BMI
forecasting growth of just 0.1% in 2009, down from 4%. This is likely to depress polymer segments like
PVC, which are highly exposed to the building sector. However, the situation should be mitigated by an
EGP15bn stimulus package intended to boost jobs and consumer spending through direct support to
infrastructural projects. An expected time-lag in the disbursal of state funds and the start of work could
mean that by the time the stimulus starts having an impact on petrochemicals, the industry may well be on
the return to previous levels of growth.
At the same time, export markets will offer little relief. Egyptian analysts have suggested that
petrochemical exports could decline by up to 40% in 2009. BMI is less pessimistic, given that some of
Egypt’s main markets in the Middle East are likely to rebound strongly towards the end of 2009.
Nevertheless, the market environment will be tough for Egyptian petrochemicals producers and in Q209
some producers temporarily took capacity offline for maintenance, with Sidpec shutting its Ameriya
150,000tpa HDPE unit and EChem shutting down PVC capacity for 40 days. Both producers are heavily
exposed to external markets.
Over the medium- to long-term, leveraging Egypt’s petrochemicals future to its full potential still very
much depends on attracting concrete multinational interest in its master plan. Egypt’s demand for plastics
is massive. Some 1.2mn tonnes of petrochemicals used to manufacture plastics are consumed by the local
market each year – equal to more than 18kg for each citizen. Local production of these materials is
around only 470,000 tpa at present, so two-thirds has to be imported. Reducing this reliance on imported
plastics is one of the main aims behind the petrochemical master plan.
BMI expects PP capacity to rise to 820,000 by 2013. We do not believe Egypt Hydrocarbon
Corporation’s (EHC) proposed complex near Suez – which would have two plants capacity of 450,000
tpa each, producing HDPE and LLDPE alongside a cracker and ammonia, ammonium nitrate, and
methanol plants – will come online by 2013, even if it does manage to secure financing by 2010.
Similarly, it is doubtful that GAFI’s bid for foreign investment in a US$200mn PVC plant with a capacity
of 120,000 tpa and a US$150mn PS plant with a capacity of 200,000 tpa will materialise in time for them
to come onstream by the end of the forecast period. The nitrogen-based fertiliser sector is expected to
expand, with EBIC and Agrim adding around 2.1mn tpa of ammonia and urea production capacity by
2010. In June 2009, Orascom Construction Industries (OCI) announced that its subsidiary Egypt Basic
Industries Corporation (EBIC) had made its first export shipment of ammonia totalling 23,400 tonnes.
The shipment was made via its export facilities at the Red Sea port of Sokhna, where its 700,000tpa
ammonia plant is based. The plant is close to OCI’s Egyptian Fertilizers Company urea plant, which
is carrying out a debottlenecking project that will lift capacity from 1.3mn tpa to 1.45mn tpa by
2010. Additionally, the transfer of Solvin’s idle German plants to Port Said adds 160,000 tpa of VCM and
180,000 tpa of PVC to Egypt’s petrochemical output.

Executive Summary ...5
SWOT Analysis7
Egypt Petrochemicals Industry SWOT. 7
Egypt Political SWOT. 8
Egypt Economic SWOT... 9
Egypt Business Environment SWOT 9
Global Market Overview..10
Global Ethylene Capacities . 10
Table: World Ethylene Production By Country, 2008 And 2013 (‘000 tonnes capacity) . 10
Polypropylene. 13
Global Oil Products Market Review.. 16
Table Global Oil Prices, 2003-2013 (US$ per barrel)... 20
African Overview..21
Table: Africa’s Gas And Oil Reserves, 2008 21
Table: Africa’s Cracker Capacity, 2007-2012 (‘000 tpa) . 24
Egypt Market Overview...25
Petrochemicals Business Environment.27
Table: Middle East And Africa Petrochemicals Business Environment Ratings 27
Limits Of Potential Returns.. 28
Risks To Realisation Of Returns . 28
Egypt’s Business Environment 29
Industry Trends And Developments ...38
Upstream . 39
Projects And News. 40
Fertiliser.. 42
Regulations And Policy. 44
Industry Forecast Scenario 45
Table: Egypt’s Petrochemicals Sector, 2007-2013 . 47
Macroeconomic Outlook.. 47
Table: Egypt – Economic Activity, 2005-2013. 50
Company Monitor.51
Egyptian Petrochemicals Holding Company (EChem) .. 51
Sidi Kerir Petrochemicals (Sidpec) 52
Country Snapshot: Egypt Demographic Data..53
Section 1: Population 53
Table: Demographic Indicators, 2005-2030 53
Table: Rural/Urban Breakdown, 2005-2030 ... 54
Section 2: Education And Healthcare 54
Table: Education, 2002-2005 . 54
Table: Vital Statistics, 2005-2010.. 54
Section 3: Labour Market And Spending Power . 55
Table: Employment Indicators, 2001-2006.. 55
Table: Consumer Expenditure, 2000-2012 (US$) ... 55
Table: Average Annual Wages, 2000-2012.. 56
BMI Methodology .57
How We Generate Our Industry Forecasts .. 57
Chemicals And Petrochemicals Industry .. 57
Cross Checks .. 58
Business Environment Ratings 59
Table: Petrochemicals Business Environment Indicators And Rationale 59
Weighting. 60
Table: Weighting Of Indicators .. 60