Protection fee controversy results in volatile PP market in Egypt

Egypt’s PP market witnessed a great deal of volatility in June due to confusion regarding the implementation of a new protection fee announced on import homo-PP prices effective as of June 5, as per ChemOrbis. According to the government’s initial announcement, all homo-PP imports would be subject to a protection fee of 15% or US$267/ton, whichever was largest, for a 200 day period from June 5 to December 22, 2012. In the face of widespread resistance from buyers, the government later announced a 100 day suspension of the protection fees only to reverse itself later and reaffirm that the protection fees were still in place. An agreement between the Egyptian government and EPPC, the only domestic producer currently active in Egypt, was reached on June 27. According to the terms of the agreement, the protection fees will remain in place. In exchange, EPPC has agreed to fully cover the market’s needs and to set its prices in accordance with monthly global price announcements. The agreement further specified that buyers purchasing from the producer will be required to purchase at least 50 tons of PP per month from EPPC. The Egyptian Plastic Exporters and Manufacturers Association (EPEMA) stated it will monitor the terms of the agreement to ensure that buyers’ interests are respected while adding that they will also help coordinate smaller PP buyers into groups in order to ensure that no buyers are frozen out of the market by the 50 ton monthly minimum. Egypt’s PP market passed a volatile month in June as uncertainty surrounding the status of the new protection fees led to some wild swings in prices, as per ChemOrbis. In the first full week of June, following the initial announcements of the protection fees, locally-held PP prices jumped by more than $250/ton while import prices rose by around US$130-135/ton. One week later, following reports that the protection fees had been suspended, prices plunged back towards their early June levels, with local prices dropping more than US$270/ton and imports sliding by around US$55/ton. This week, local prices spiked by US$240/ton again after the protection fees were reaffirmed while announcements of new July import prices and concerns about weaker post-protection fee demand for imported cargoes pulled down imports by around US$110/ton.
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