1. Market development and trends
Chemical sector is boosting the Egyptian manufacturing industry
The prospects for the chemical industry in Egypt are favorable. Output is expected to grow by up to 6% in 2019. Due to the healthy population growth of around 2%, expanding natural gas production and rising exports by Egyptian companies, the general market conditions are encouraging. The government’s main focus is on expanding the petrochemical industry. Agriculture, which is growing at a constant rate of 3% a year, requires agricultural chemicals, and the robust construction sector ensures a sustained demand for paints and varnishes. Planned improvements in health care for nearly 100 million Egyptians and export opportunities are encouraging pharmaceutical manufacturers to invest.
According to the latest figures from the CAPMAS statistics office, the chemical and fertilizer industries are key growth drivers for the Egyptian industrial output. In the third quarter of 2018, industrial production (excluding crude oil and refining) rose by EUR 2.17 billion to EUR 9.11 billion compared to Q3 2017. The chemical and fertilizer sector, which is the third-largest industry segment, doubled to EUR 1.42 billion.
Foreign demand was also dynamic. The Export Council for Chemicals and Fertilizers estimates an increase of exports of 22% in 2018 against the previous year. This would have increased exports to US$ 5.5 billion.
Expansion of petrochemicals to meet rising domestic demand
Both oil and gas production and consumption are increasing in Egypt. In May 2019, the government raised its gas production forecast for the fiscal year (1 July 2019 to 30 June 2020) by 6%. According to the Internet portal Egypt Oil & Gas, the new target is now 7.95 billion cubic feet/day. With the growing supply of natural gas, Egypt’s opportunities for petrochemical refining are also increasing. For example, the demand for plastics, which is growing at an annual rate of around 10%, could be satisfied to a greater extent by domestic production. In April 2019, the head of the Chemicals and Fertilizers Export Council, Khaled Abo Al Makarem, estimated that by 2023, Egypt could cover half of its plastics requirements itself. The country is still 70% dependent on imports.
The Ministry of Petroleum expects diesel demand to rise by 1.3 million to 16.8 million tons and gasoline consumption by 0.54 million to 8 million tons by mid-2020. The ministry is focusing on further expanding the downstream sector and increasing Egypt’s self-sufficiency in fuels. In addition to new projects and the expansion of existing capacities, the plans also include the modernization of existing plants. Local sources covered about 65% to 68% of domestic demand for fuels. Imported petroleum products come from various Arab countries. According to the Daily News Egypt, the state-owned Egyptian Petroleum Corporation purchases oil products primarily from Saudi Aramco, Kuwait Petroleum Corporation, and Iraqi Sumo.
The largest single petrochemical project is the Tahrir complex currently under construction in Ain Sokhna on the Gulf of Suez. A special feature is that Carbon Holding, a private company, is implementing the US$ 10.9 billion project. According to the database MEED Projects, construction works are advancing. However, local media provide different information on the status of the financing of the project.
Egyptian General Petroleum Corporation (EGPC) plans to increase the capacity of its eight refineries from 38 million to 41 million tons for US$ 12.6 billion. The target for 2019 is 42 million tons through efficiency improvements and new plants. In October 2018, the state-owned Middle East Oil Refinery (MIDOR) agreed a US$ 1.2 billion loan with three European banks. The money will be used to expand the refinery, which will cost a total of US$ 2.2 billion. According to a report by newspaper Amwal Al Ghad, the supply of raw materials improved in 2018 due to production increases and new developments. Thus, the Egyptian production of crude oil and condensates reached about 660,000 barrels daily at the turn of the year.
The Indian polymer film manufacturer Flex Films announced in early 2019 that it would invest US$ 200 million in Egypt. The local subsidiary Flex P Films Egypt plans to set up a second production facility. According to the newspaper Al Masry Al Youm, Flex P Films produces 70% of its films for export.
Agrochemicals benefit from steady growth in agriculture
Between 2017 and 2022, the market research company Mordor International expects average annual demand growth of agrochemicals of 2.8%. An important driver of demand for agrochemicals is the scarcity of agricultural land. At the same time, the population is growing and Egypt is increasingly successful in exporting fruit and vegetables to Europe, for example. For this reason, increasing efficiency in cultivation is particularly important. Agrochemicals are mainly used in the cultivation of corn, rice, and wheat. Pesticides are the most common crop protection agent. Imported products predominate in this area. Egypt has to purchase about 75% of the pesticides it needs from abroad.
According to Mordor Intelligence, the fragmented Egyptian market for agrochemicals is dominated by foreign companies. Analysts cite Agrium, Belaruskali, Bunge, CF Industries Holdings, DuPont, OCP, One Acre Fund, Potash Corporation of Saskatchewan, Sasol and Yara International as examples.
The local supplier El Nasr Company for Intermediate Chemicals (NCIC) is planning a new fertilizer complex in Ain Sokhna on the Gulf of Suez. ThyssenKrupp secured an EPC (Engineering, Procurement and Construction) contract for the project planned until 2022. Evergrow for Specialty Fertilizers is also on course for expansion. In February 2019 the company agreed on financing with three Arab banks to implement the plans. Evergrow plans to expand its capacity to 190,000 tons for EUR 105 million.
In April 2019, the state-owned Chemical Industries Holding Company (CIHC) announced a modernization strategy. The fertilizer manufacturers Delta for Fertilizers and Chemical Industries and El Nasr for Fertilizers and Chemical Industries are to make a start. The holding company has a total of 17 subsidiaries in ten branches of the chemical industry, which are to be modernized within three years.
Pharmaceutical manufacturers build up new capacities
Population growth, low per capita health expenditure, and a high dependence on imports of pharmaceuticals make Egypt an attractive healthcare market. Business Monitor International (BMI) expects pharmaceutical sales to rise from US$ 2.27 billion to US$ 2.49 billion between 2018 and 2021.
Pharmaceutical companies in Egypt are investing in new capacities on various scales. French manufacturer Sanofi is increasing its investment budget by 50% in 2019. The Egyptian government is aiming to build a factory for plasma derivatives for the treatment of hepatitis B, C, and HIV. EIPICO plans to build a factory for biosimilar drugs in the 10th of Ramadan City near Cairo. The plant is expected to cost around EUR 53 million. According to the business newspaper Al Mal, the pharmaceutical manufacturer El Arabeya wants to modernize and digitize production lines. The company has budgeted around EUR 2.1 million for this in the fiscal year 2019/20.
Emisal Salts is planning a factory for salt for medical applications. The production of 15,000 tons per year will supply the local market. According to Al Mal, Egypt imports 25,000 tons of medical salts per year to date. Emisal intends to invest almost EUR 8 million for the plant.
The Egyptian Ministry of Health is interested in foreign companies to invest in the production of dialysis fluid and peritoneal dialysis solution. According to the State Information Service, Ministry spokesman Khaled Megahed named these areas among others in April 2019 in front of a delegation from Oman.
Saudi Pharmaceutical Industries & Medical Appliances Corporation (Spimaco) announced further expansion plans in March 2019. Spimaco has a factory in Borg El Arab near Alexandria following an earlier acquisition of Meivo International Pharmaceutical Industries. According to the plans, it will be expanded and made more efficient. In spring 2019, the company also negotiated with five medium-sized Egyptian pharmaceutical manufacturers to examine possible takeovers.
Gilead Sciences has selected its Egyptian partner EvaPharma to develop the African market. As a distribution and production center, Egypt will form a basis for expansion on the continent.
Continuing upward trend in paints and varnishes
Egypt is both the largest producer and consumer of paints and varnishes in North Africa. However, figures for this segment are scarce. Housing construction is generating strong demand for wall paints. Market research company Mordor Intelligence expects average annual growth of 2.1% for protective paints between 2018 and 2023. A major driver are the numerous infrastructure projects. There is also a trend for water-based products. According to an earlier analysis by Frost & Sullivan, the market for paints and varnishes should grow by an annual average of 4.5% to around US$ 254 million between 2014 and 2018.
Egypt: Selected early-stage investment projects in the chemical industry
|Project||Company||Investment (US$ million)||Status||Comment|
|Petrochemical complex in El Alamein||Egyptian Petrochemicals Holding Company (ECHEM)||8,500||Preliminary studies||ECHEM was in the selection process for a consulting firm in March 2019|
|Petrochemical complex in Suez||Ministry of Petroleum||3,000||Preliminary studies||Tender for the main contract expected in October 2019|
|Aromatics complex in Suez||ECHEM||2,000||Preliminary studies||Part of the governments Petrochemical Master Plan|
|Polypropylene factory in Alexandria||Sidi Kerir Petrochemicals (SIDPEC)||1,700||Prequalification for the main contract||Planned annual capacity: 450,000 tons|
|Factory for phosphate and potassium in Edfu||Egyptian Company for Phosphate and Compound Fertilizers (EGYPHOS)||1,600||Preliminary studies||Project already planned since 2008, could get underway from the end of 2019|
|Complex for ethylene and mono-ethylene glycol in Port Said||ECHEM||1,300||Preliminary studies||Tender for the main contract expected in August 2019|
|Insulin factory||HoldiPharma||1,000||Preliminary studies||Project planned since the beginning of 2016|
Source: MEED Projects, May 2019
The aim of the government’s Petrochemicals Master Plan 2002 to 2022 is to expand local production. Petroleum company EGPC has drawn up the plan with a total value of US$ 10 billion. It includes the construction of 50 new plants with an annual capacity of 15 million tons of intermediate and end products. In the third and final phase through 2022, the focus will be on the production of propylene and polypropylene, a third olefin complex and plants for the production of styrenes and vinyl. Projects also include detergents, butadiene, and styrene-butadiene latex.
For the Egyptian Ministry of Petroleum, energy-efficient production is becoming increasingly important. In addition to expanding petrochemical production, more economical production methods are expected to help reduce dependence on imports. According to the Daily News Egypt, reduced energy consumption in the refineries and other plants already saves around EUR 18 million annually. Egypt wants to become part of the World Bank’s “Zero Routine Flaring” initiative. It is directed against the routine flaring of associated petroleum gases.
The state-owned Misr Petroleum Company (MPC) and Petronas from Malaysia founded a joint venture in February 2019. This joint venture will refine imported crude oil at the MPC refinery in Amreya and sell it under a common brand name. The products are intended either for re-export or for the domestic market.
2. Local industry structure
Egyptian companies active in plastics, rubber, and fertilizers
The Chamber for Chemical Industries in 2019 counted just under 9,500 companies. With 4,921 companies, plastics, rubber, and petrochemicals represented about half of the members. The diversified chemicals and fertilizers sector had 1,779 companies. The number of companies in the areas of paints, inks, and resins (877) and cleaning agents (727) was lower. 665 companies from the paper and cardboard sector and 494 from waste management also belonged to the Chamber for Chemical Industries.
In the 2000s, an extensive expansion of petrochemical capacities began in Egypt. Today, methanol, PET, PVC, ethylene, polyethylene, propylene, polypropylene, and linear alkylbenzene are among the products manufactured locally.
According to the Egyptian Ministry of Investment, public companies Delta Company for Fertilizers, Semadco and KIMA produce nitrogenous fertilizers. The private companies Abu Qir Fertilizers, Alexandria Fertilizers, EBIC, Helwan Fertilizers, Liquifert, MOPCO Fertilizers, Suez Fertilizers, and The Egyptian Fertilizers Company are also active in this sector.
In April 2019, the local fertilizer manufacturer Phosphate Misr received the exclusive right to exploit rock phosphate deposits in the Abu Tartur region. Oil Minister Tarek El Molla signed a corresponding license agreement.
Egypt: Main companies in the chemical sector
|Company||Field||Sales (in US$ million)||Internet|
|Carbon Holdings||Petrochemical products||Not available||http://www.carbonholdings.com|
|Chemical Industries Holding Company||Various chemical products||Not available||http://www.cihc-eg.com|
|ECHEM||Ethylene, linear alkylbenzene, methanol, sulfur||84.9 (fiscal year 2017/18)||https://echem-eg.com|
|Egyptian General Petroleum Corporation (EGPC)||Petroleum products||No recent numbers available||http://www.egpc.com.eg|
|Egyphos||Phosphate, complex fertilizer||Not available||Not available|
|Egyptian International Pharma Industries Company (EIPICO)||Pharmaceuticals||154.0 (2018)||http://www.eipico.com.eg|
|HoldiPharma||Pharmaceuticals, chemicals, medical technology||660.5 (fiscal year 2016/17)||http://www.holdipharma.com|
|Egyptian Chemical Industries (KIMA)||Liquid ammonia, urea||32.0 (fiscal year 2017/18)||http://www.kimaegypt.com|
|Sidi Kerir Petrochemicals||Polyethylene||324.0 (2018)||http://www.sidpec.com|
|TCI Sanmar Chemicals Egypt||Caustic soda, vinyl chloride monomer, PVC||Not available||http://sanmargroup.com/tci.php|
Note: Fiscal year from 1 July to 30 June each year
Source: GMI research
3. General rules for doing business
The Egyptian market for chemical products is characterized by extensive government regulation. For many product groups, market access and other parameters up to the price are regulated by the state. The Egyptian Organization for Standardization & Quality (http://www.eos.org.eg) has a testing department for chemical products and building materials.
The regulatory authority for pharmaceuticals is the Egyptian Drug Authority, which belongs to the Ministry of Health. It provides extensive information and new announcements at http://www.eda.mohp.gov.eg
Manufacturers and importers of dietary supplements, medicines and their raw materials (active ingredients and precursors), biocidal products, cosmetics, medical equipment, and aids must register their products with the Central Administration of Pharmaceutical Affairs (CAPA) in the Ministry of Health in order to obtain marketing authorization.
Depending on the nature of the goods, various documents may be required for the registration application, including a certificate of analysis, a manufacturer’s declaration of conformity, an over-the-counter sales certificate, proof of good manufacturing practice and CAPA price approval for pharmaceuticals.
Medicines must be imported directly from the country of origin. Narcotic or psychotropic substances and their precursors are subject to authorization. A large number of goods are only released for the Egyptian market after a successful initial inspection by CAPA.
|Ministry of Health and Population||http://www.mohp.gov.eg|
|Federation of Egyptian Industries||http://www.fei.org.eg|
|Egyptian Plastic Exporters and Manufacturers Association||http://www.epema.org|
|Chemicals and Fertilizers Export Council||http://www.cec-eg.com|
|Plastex (international trade fair in Cairo)||http://www.plastex-online.com|