Egyptian PET converters concerned over new government food rations

09-Jul-14

In Egypt, there had been talk regarding the government’s plan to rearrange its food rationing program since early June as per ChemOrbis. These expectations materialized during this past week when the government decided to gradually stop the financial support that they are providing to citizens for food supplies. Edible oil was one of the main foods that were given to the people through this subsidy program. The Egyptian government had been assigning each family with a certain amount of oil per person at a lower price than the actual market level. As of last week, this subsidy program was changed. Financial support that was previously measured in kilos or packets is now going to be offered on Egyptian pound equivalent basis. Meanwhile, prices of the subsidies will be lifted to the current market levels and people will be able to choose whatever food subsidy they need on a monthly basis rather than choosing between only oil, rice or sugar. Following this development, Egyptian players anticipated that demand for oil subsidies will drop by at least 20%. This situation will eventually have an effect on the PET market, too. Apart from the change in the subsidy program, PET bottle manufacturers will also need to produce bottles in a new shape and volume. This means manufacturers will have to change their usual preforms. A PET bottle manufacturer commented, “This new policy would harm the manufacturers. Especially the large sized buyers, who used to consume around 1000 tons of PET per month for producing oil bottles, will be affected the most by these new developments since they used to hold contracts with the government for producing PET bottles for the oil subsidy program.” A trader operating in Cairo said, “The changes in the food subsidies in Egypt is to affect the end product demand for PET since the government now aims to change the shape of the oil bottles, too. This requires manufacturers to change the mould they are using and this might take at least three months.” According to ChemOrbis, a different trader remarked, “The changes in the shape of the bottles will affect both private and public sectors. Buyers may reduce their oil consumption as a result of having more choices and that would affect the PET converters’ purchases. Apart from this, changing the mould’s shape in line with the government’s new requirements may take two to three months.