Gas: The ripple effect – Economy – Al-Ahram Weekly

The federal government has raised the worth of pure fuel for the economic 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 ultimate price of merchandise through which pure fuel is used.

The value of pure fuel now stands at $5.75 per million British thermal models (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 choice 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 fuel at $4.5 per MMBtu in an try to extend exports.

World fuel costs have been growing this yr 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 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, stated that almost all of the corporate’s manufacturing will see worth will increase starting from $6 to $10 because of the choice.

Gasoline worth hikes may also add extra chips on the shoulders of corporations that need to enterprise into new overseas markets, Khalifa stated, explaining that freight prices have additionally doubled. This can 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 fuel prices.

Khalifa famous that electrical energy costs can also improve, which implies that manufacturing price will hike additional.

Khaled Abul-Makarem, chairman of the Chemical Industries Export Council, stated that petrochemicals and fertilisers are among the many most affected sectors by pure fuel worth rises. Gasoline is a essential 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however since exporters had already signed contracts primarily based on cheaper costs, they’ll both should cancel the outdated contracts, and therefore lose their prospects, or export their merchandise and shoulder the losses, he added.

The margin of losses is dependent upon how a lot fuel is used within the manufacturing of the product, Abul-Makarem stated, stating that it’s a proper choice on the unsuitable 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 towards 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 discipline. Moroccan fertilisers can even compete with Egypt’s, he added.

Various corporations within the constructing supplies sector which can be listed on the Egyptian Inventory Alternate reported the impact of pure fuel worth rise on a number of industries.  

Alexandria’s Ezz Dekheila Metal stated that pure fuel is among the essential parts within the manufacturing of iron as a uncooked materials. Its worth improve will certainly have an effect on the price of manufacturing, the corporate stated, 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 latest improve in fuel costs, whereas Qena’s Misr Cement Firm stated it depends on coal as the principle 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 worth of pure fuel on steel industries shall be restricted and that manufacturing facility house owners can deal with the rise with out elevating the worth 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 Vitality Committee on the federation, stated 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 greater charges than in Egypt.

Industries with heavy fuel consumption will increase the worth 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 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

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