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 one more problem to their companies.

The choice will lead to a rise within the remaining price of merchandise by 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 eat 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 offered 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 rising this yr amid the rising demand and a scarcity in provide. Gasoline costs in Europe, together with within the UK, reached file highs previously 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 value will increase starting from $6 to $10 because of the resolution.

Gasoline value hikes can even add extra chips on the shoulders of corporations that need to enterprise into new international markets, Khalifa stated, explaining that freight prices have additionally doubled. This can instantly lead to a drastic drop within the earnings 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 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 value rises. Gasoline is a important part in some fertilisers, basically 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 may both need to cancel the previous contracts, and therefore lose their clients, 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 resolution on the fallacious time. The rise within the value of pure fuel ought to have occurred later to issue it within the exporters’ contracts.

Some international locations have the leverage to compete towards Egyptian merchandise, he acknowledged. Petroleum-producing Arab international locations can present pure fuel at cheaper costs, subsequently their merchandise will price lower than Egyptians’, particularly within the petrochemicals area. Moroccan fertilisers may also compete with Egypt’s, he added.

Quite a few corporations within the constructing supplies sector which are listed on the Egyptian Inventory Alternate reported the impact of pure fuel value rise on a number of industries.

Alexandria’s Ezz Dekheila Metal stated that pure fuel is likely one of the important 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 stated, 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 current improve in fuel costs, whereas Qena’s Misr Cement Firm stated 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 harassed that the impact of the rise within the value of pure fuel on metallic industries shall be restricted and that manufacturing facility homeowners can address the rise with out elevating the worth of the ultimate product.

The larger drawback, nevertheless, would be the impact of the rising value 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 increased 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

Quick hyperlink:

Source link

Comments (No)

Leave a Reply