Healthy prospects for Egypt’s chemicals and plastics sector

Egypt’s chemicals and plastics sector is becoming an increasingly important contributor to industrial output and exports. With demand being driven by agriculture and fast-moving consumer goods (FMCG), the sector is likely to become an industrial heavyweight in the coming years.

Domestic demand

The petrochemicals sector currently accounts for around 3% of the country’s GDP and 12% of the industrial sector, according to industry press, with the Egyptian Industrial Development Authority placing the plastics and petrochemical industry’s value at around $7.5bn last year.

While domestic use of plastics is already relatively high, there is further room for growth. Plastic consumption stood at 25 kg per capita in 2012, with demand growing by 6% per year since 2006. Although this ranks above the Middle Eastern average of 16 kg per capita, the European average is much higher, at around 136 kg, suggesting that demand could increase in line with economic growth.  

Data also suggests potential for local production. Imported plastics currently account for 72% of domestic consumption, according to Sidi Kerir Petrochemicals (SIDPEC), a leading local producer. With imports increasingly constrained by foreign exchange shortages, local plastics manufacturers could see their market share rise.

Agro-chemicals are also expected to see a sharp uptick in domestic demand, as the government works to prepare more land for cultivation across the country. In August the government expanded a land reclamation project for agriculture in the Western Desert from 1m to 1.5m feddans.

These moves should ensure a large domestic market for a wide range of petrochemicals and finished products.

Export opportunities

Beyond the domestic market, Egypt’s plastics industry has posted substantial export growth. While the broader industrial sector has faced headwinds and declining exports, the total value of Egyptian plastic exports rose 21% year-on-year in 2014 to reach LE10.6bn ($1.4bn), according to the Egyptian Chemical and Fertilisers Export Council.

The Egyptian Indian Polyester Company was the largest exporter, with LE1.5bn ($191.6m) worth of overseas sales, followed by the Egyptian Propylene & Polypropylene Company, with export revenues of LE1.3bn ($166m) over the year.

While issues related to the supply of power, gas and hard currency persist, last year’s export figures suggest that the sector is continuing to flourish, thanks in large part to Egypt’s proximity to many high-consuming markets.

Turkey accounted for the highest share of Egyptian plastics exports last year, with nearly one-third of the total sold, at LE2bn ($255.3m). This was followed by Italy (LE877.7m, $112.1m), Belgium (LE736.6m, $97.5m), Iraq (LE531.7m, $67.9m) and Spain (LE497.5m, $63.5m).

Foreign interest

Strong demand both at home and abroad has prompted foreign players to explore investment opportunities in petrochemicals and plastics production within Egypt.

Indian chemicals firm Sanmar announced plans in April to undertake further expansion within the country, according to local press, in a bid to establish itself as the largest producer of PVC and caustic soda in the Middle East and North Africa region. The company is set to invest some $350m to expand its Trust Chemical Industries plant in Port Said, bringing its total investment in the country to $1.45bn.

Private sector involvement will also benefit from the government’s National Petrochemicals Plan, a 20-year development programme that is now entering its third phase. Under the strategy, the country hopes to substantially boost petrochemicals output and double ethylene capacity by 2020. The initiative is also expected to foster development of downstream plastics and fibres.

While the current economic situation could see some plans delayed, the prospects for the industry are healthy and the sector is expected to attract further investment going forward.