The federal government has raised the value of pure gasoline for the commercial sector by 28 per cent efficient 1 November, placing producers earlier than yet one more problem to their companies.
The choice will lead to a rise within the closing value of merchandise through which pure gasoline is used.
The worth of pure gasoline now stands at $5.75 per million British thermal items (MMBtu) for the industries that closely eat gasoline like metal, petrochemicals and fertilisers, and $4.75 per MMBtu for different sectors.
The federal government’s choice brings to an finish the assist it offered to the commercial sector with the unfold of the coronavirus pandemic when it had set the value of pure gasoline at $4.5 per MMBtu in an try to extend exports.
International gasoline costs have been growing this 12 months amid the rising demand and a scarcity in provide. Fuel costs in Europe, together with within the UK, reached document highs up to now months, whereas the New York Mercantile Change (Nymex) future contracts have doubled, reaching their highest ranges since late 2008.
Ahmed Khalifa, deputy chairman of Evergrow, a number one firm within the manufacturing of potassium fertilisers within the Center East, mentioned that almost all of the corporate’s manufacturing will see value will increase starting from $6 to $10 because of the choice.
Fuel value hikes may also add extra chips on the shoulders of firms that need to enterprise into new overseas markets, Khalifa mentioned, explaining that freight prices have additionally doubled. This may immediately lead to a drastic drop within the earnings of exporters who had signed contracts with the importing events earlier than the rise in delivery and gasoline prices.
Khalifa famous that electrical energy costs may additionally improve, which implies that manufacturing value will hike additional.
Khaled Abul-Makarem, chairman of the Chemical Industries Export Council, mentioned that petrochemicals and fertilisers are among the many most affected sectors by pure gasoline value rises. Fuel is a foremost element in some fertilisers, basically making as much as 80 per cent of the product. The shortage of pure gasoline globally will improve demand on Egyptian merchandise, however since exporters had already signed contracts based mostly on cheaper costs, they may both must cancel the previous contracts, and therefore lose their clients, or export their merchandise and shoulder the losses, he added.
The margin of losses is determined by how a lot gasoline is used within the manufacturing of the product, Abul-Makarem mentioned, mentioning that it’s a proper choice on the incorrect time. The rise within the value of pure gasoline ought to have occurred later to issue it within the exporters’ contracts.
Some international locations have the leverage to compete in opposition to Egyptian merchandise, he said. Petroleum-producing Arab international locations can present pure gasoline at cheaper costs, subsequently their merchandise will value lower than Egyptians’, particularly within the petrochemicals discipline. Moroccan fertilisers can even compete with Egypt’s, he added.
Quite a lot of firms within the constructing supplies sector which can be listed on the Egyptian Inventory Change reported the impact of pure gasoline value rise on a number of industries.
Alexandria’s Ezz Dekheila Metal mentioned that pure gasoline is among the foremost components within the manufacturing of iron as a uncooked materials. Its value improve will certainly have an effect on the price of manufacturing, the corporate mentioned, including that it’s versatile sufficient to alter the quantity of uncooked supplies used within the manufacturing course of.
The South Valley Cement Firm expects the price of manufacturing to rise from between 30 per cent to 50 per cent on account of the current improve in gasoline costs, whereas Qena’s Misr Cement Firm mentioned it depends on coal as the primary supply of vitality.
Mohamed Hanafi, head of the Metallic Industries Chamber on the Federation of Egyptian Industries, anticipates the heaviest toll will fall on glass, fertilisers, and petrochemicals.
Hanafi confused that the impact of the rise within the value of pure gasoline on metallic industries shall be restricted and that manufacturing unit homeowners can deal with the rise with out elevating the value of the ultimate product.
The larger drawback, nonetheless, would be the impact of the rising value of pure gasoline on energy stations.
Tamer Abu Bakr, head of the Power Committee on the federation, mentioned that the industries that closely use pure gasoline will increase their costs, however their merchandise will stay cheaper than these imported as a result of gasoline costs elevated overseas at increased charges than in Egypt.
Industries with heavy gasoline consumption will increase the value of the ultimate product by between 15 per cent and 20 per cent, whereas the sectors that use pure gasoline solely as a supply of vitality will improve their costs by 5 per cent or 10 per cent, Abu Bakr famous.
*A model of this text seems in print within the 4 November, 2021 version of Al-Ahram Weekly