The federal government has raised the worth of pure gasoline for the economic sector by 28 per cent efficient 1 November, placing producers earlier than one more problem to their companies.
The choice will end in a rise within the ultimate price of merchandise wherein pure gasoline is used.
The worth of pure gasoline now stands at $5.75 per million British thermal models (MMBtu) for the industries that closely devour gasoline like metal, petrochemicals and fertilisers, and $4.75 per MMBtu for different sectors.
The federal government’s resolution brings to an finish the assist it supplied to the economic sector with the unfold of the coronavirus pandemic when it had set the worth of pure gasoline at $4.5 per MMBtu in an try to extend exports.
World gasoline costs have been growing this yr amid the rising demand and a scarcity in provide. Fuel costs in Europe, together with within the UK, reached document highs prior to now months, whereas the New York Mercantile Alternate (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 worth will increase starting from $6 to $10 because of the resolution.
Fuel worth hikes may also add extra chips on the shoulders of firms that wish to enterprise into new international markets, Khalifa mentioned, explaining that freight prices have additionally doubled. This can immediately end in a drastic drop within the income of exporters who had signed contracts with the importing events earlier than the rise in transport and gasoline prices.
Khalifa famous that electrical energy costs may enhance, which signifies that manufacturing price 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 worth rises. Fuel is a important part in some fertilisers, primarily making as much as 80 per cent of the product. The shortage of pure gasoline globally will enhance demand on Egyptian merchandise, however since exporters had already signed contracts based mostly on cheaper costs, they’ll both need to cancel the outdated contracts, and therefore lose their clients, or export their merchandise and shoulder the losses, he added.
The margin of losses relies on how a lot gasoline is used within the manufacturing of the product, Abul-Makarem mentioned, mentioning that it’s a proper resolution on the unsuitable time. The rise within the worth 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, due to this fact their merchandise will price lower than Egyptians’, particularly within the petrochemicals area. Moroccan fertilisers may also compete with Egypt’s, he added.
Various firms within the constructing supplies sector which are listed on the Egyptian Inventory Alternate reported the impact of pure gasoline worth rise on a number of industries.
Alexandria’s Ezz Dekheila Metal mentioned that pure gasoline is without doubt one of the important components within the manufacturing of iron as a uncooked materials. Its worth enhance will certainly have an effect on the price of manufacturing, the corporate mentioned, including that it’s versatile sufficient to vary 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 because of the latest enhance 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 Steel Industries Chamber on the Federation of Egyptian Industries, anticipates the heaviest toll will fall on glass, fertilisers, and petrochemicals.
Hanafi harassed that the impact of the rise within the worth of pure gasoline on metallic industries can be restricted and that manufacturing unit homeowners can deal with the rise with out elevating the worth of the ultimate product.
The larger drawback, nevertheless, would be the impact of the rising worth of pure gasoline on energy stations.
Tamer Abu Bakr, head of the Vitality Committee on the federation, mentioned that the industries that closely use pure gasoline will elevate their costs, however their merchandise will stay cheaper than these imported as a result of gasoline costs elevated overseas at greater charges than in Egypt.
Industries with heavy gasoline consumption will elevate the worth 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 enhance 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