What happened in February of this year?

Banks in Egypt have begun to notify importers of the Central Bank of Egypt's decision to request letters of credit for purchases starting in March. According to the decision of the central bank, on February 12th, the documentary collection method is no longer accepted by banks for the import of goods into Egypt.

The reaction from industry groups, including plastics and chemicals, was completely negative and importers called for a reversal of the move. According to the manufacturers, this decision will cause supply problems and increase costs, leading to higher prices in the domestic market.

L/Cs requirements contribute to price increase

Following this February announcement, domestic prices of LDPE film, HDPE film and LLDPE C4 film have increased by 13-14% on average in just about two weeks. The domestic PP market also increased similarly and PPH price inj. and the weekly average of domestic raffia is up 14% from early February prices.

Coupled with the devaluation of the Egyptian Pound and the upward trend in import prices, the domestic bullish momentum  continued in March. Although the domestic market fluctuated from mid to late April because of signs The trend reversed PE and PP, but local prices continued to receive support from limited supply and higher additional costs in early May.

Central bank cancels decision to request L/C for purchases

In a published notice on May 10, manufacturers, wholesalers and importers of production inputs were allowed to use documentary collection to pay for imported goods. This decision comes amid a challenging macroeconomic environment in Egypt that has been exacerbated by recent economic and geopolitical upheavals.

Traders welcomed this news as many SMEs face challenges at banks due to lack of institutional capacity to open L/C.

The reaction of the local PP, PE market to this decision

Last week, the immediate market reaction was cautious. However, local sellers have slashed most of their quotes this week. Although there is no clear information on how to proceed with pending L/Cs, distributors feel uneasy and try to close some deals at lower prices, especially after found that major suppliers in the Middle East were willing to negotiate discounts.

PP prices fell around 1000-4000 EGP/ton from last week, while PE prices fell relatively smaller.

Market participants also expressed concern about the dollar's ability to access liquidity. Local media reports say central bank officials have been asked to meet regularly with manufacturers to assess their access to the currency needed for imports. production input. However, the lack of dollar liquidity in the banking system remains a major concern for Egyptian market participants.