Plants are still able to operate 24 hours a day, mostly over 2 shifts (8 hours and 16 hours) to accommodate curfew. Companies are also ensuring no more than 50% of administrative personnel is in the office on the same day.
Caustic soda and chlorine are in high demand locally, as inputs to the manufacturing of cleaning products.
- During March, producers have been able to increase prices while ramping up production to fulfill local demand.
- Producers are now also paying less for electricity, their main raw material, thanks to the EGP0.10/kWh cut in prices.
Nitrogen fertilizers continue to be in demand globally, due to high demand for agricultural products.
- Last week, Egypt’s urea export prices increased to USD265/ton following supply outages in China, but have now come down to USD245/ton as China’s operating rates slowly return to normal.
- Producers have been able to maintain utilization rates at 100% for 1Q20, with exports unaffected. However, there is limited visibility beyond 1Q20, particularly for export demand.
- Companies believe local market liberalization is now a far-fetched scenario for 2020 given the circumstances.
Phosphate fertilizers faced seasonally slow demand in the local market in 1Q20, with the outlook for 2Q20 unclear.
- Plants are therefore running on low utilization rates as the outlook on exports is also blurry at the moment.
- Producers are likely to face issues with importing sulfur as a raw material if current stock runs out. However, given the low production rates, the safety stock of sulfur should last a minimum of 3 months.
Utility companies have seen no negative implications on electricity segments, however gas marketing segments have been affected by the low throughput at fuel stations.
Gas installations, although unaffected so far, could be negatively impacted in 2Q20 as compounds on lockdown start to ban the entry of technicians.
Petrochemicals have seen a marginal increase in demand in the local market, as China’s product dumping came to an end. Export markets, however, are in shambles thanks to the Covid-19 led demand slump.
- Polyethylene prices fell another 7% during March to reach USD790/ton; the lowest level since 2008.
- Producers are maintaining high plant utilization rates despite relatively poor demand, which will result in inventory build-up, driving up working capital requirements.
- Given the current situation, even if another cut in feedstock cost for petrochemical producers is passed, it would do little to support performance.
Refineries have been operating at full capacity, but we doubt this trend will continue going into 2Q20 as global demand for oil and distillates (such as diesel, jet fuel, and gasoline) takes a severe blow.
- In turn, refining margins also plunged; the diesel-HSFO (high sulfur fuel oil) spread, for example, has declined by 42% YTD to reach USD201/ton currently.
Mega projects and expansions have generally been put on hold. A wide range of delays can be expected, whether in project handover dates, feasibility studies, or execution timelines.