The federal government has raised the value of pure fuel for the economic sector by 28 per cent efficient 1 November, placing producers earlier than one more problem to their companies.
The choice will lead to a rise within the remaining price of merchandise during which pure fuel is used.
The worth of pure fuel now stands at $5.75 per million British thermal items (MMBtu) for the industries that closely devour fuel 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 value of pure fuel at $4.5 per MMBtu in an try to extend exports.
World fuel costs have been growing this 12 months amid the rising demand and a scarcity in provide. Gasoline costs in Europe, together with within the UK, reached report 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 worth will increase starting from $6 to $10 as a result of resolution.
Gasoline worth hikes can even add extra chips on the shoulders of corporations that wish to enterprise into new international markets, Khalifa mentioned, explaining that freight prices have additionally doubled. It will straight lead to a drastic drop within the income of exporters who had signed contracts with the importing events earlier than the rise in transport and fuel prices.
Khalifa famous that electrical energy costs may additionally improve, which implies 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 fuel worth rises. Gasoline is a principal part in some fertilisers, primarily making as much as 80 per cent of the product. The shortage of pure fuel globally will improve demand on Egyptian merchandise, however since exporters had already signed contracts based mostly on cheaper costs, they are going to both must cancel the outdated contracts, and therefore lose their clients, or export their merchandise and shoulder the losses, he added.
The margin of losses will depend on how a lot fuel is used within the manufacturing of the product, Abul-Makarem mentioned, stating that it’s a proper resolution on the flawed time. The rise within the worth of pure fuel ought to have occurred later to issue it within the exporters’ contracts.
Some nations have the leverage to compete in opposition to Egyptian merchandise, he said. Petroleum-producing Arab nations can present pure fuel at cheaper costs, subsequently their merchandise will price lower than Egyptians’, particularly within the petrochemicals area. Moroccan fertilisers may compete with Egypt’s, he added.
A variety of corporations within the constructing supplies sector which might be listed on the Egyptian Inventory Change reported the impact of pure fuel worth rise on a number of industries.
Alexandria’s Ezz Dekheila Metal mentioned that pure fuel is among the principal components within the manufacturing of iron as a uncooked materials. Its worth 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 because of the latest improve in fuel costs, whereas Qena’s Misr Cement Firm mentioned it depends on coal as the principle supply of power.
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 fuel on steel industries shall be restricted and that manufacturing unit homeowners can address the rise with out elevating the value of the ultimate product.
The larger downside, nevertheless, would be the impact of the rising worth of pure fuel on energy stations.
Tamer Abu Bakr, head of the Power Committee on the federation, mentioned that the industries that closely use pure fuel will increase their costs, however their merchandise will stay cheaper than these imported as a result of fuel costs elevated overseas at increased charges than in Egypt.
Industries with heavy fuel consumption will increase the value of the ultimate product by between 15 per cent and 20 per cent, whereas the sectors that use pure fuel solely as a supply of power 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
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