Importers say FX is flowing, but a weaker EGP, bank fees, and port charges are lifting costs

Importers can get USD from their banks, but bringing goods in is costing them more, with the greenback past EGP 56 and port storage charges piling up, importers and traders tell EnterpriseAM. There’s no shortage in the system, a banking source tells us, and the Central Bank of Egypt (CBE) has told banks to put the FX needs of productive sectors first while keeping importers of strategic goods supplied at the same pace as other sectors.

Getting the FX still comes at a price, says Ahmed El Malwani, head of the Foreign Trade Committee at the Federation of Egyptian Chambers of Commerce’s General Division of Importers. Several commercial banks charge a sourcing commission of 0.1-0.25%, he says, with the rate varying by line of business. Charges like these are nothing new: banks have long charged importers to open and cover letters of credit, though some raised those commissions and cashcover requirements earlier this year.

How much importers pay also depends on where they bank: Sourcing policies and commissions differ between state-owned banks and the rest, says Mohamed El Arjawy, who heads the customs committee at the same division. Even so, he sees FX availability as the biggest gain for trade right now, though a weaker EGP inevitably pushes up the price of finished goods.

Then there’s the exchange rate itself, which has moved fast: The USD crossed EGP 55 for the first time last week as foreign and regional investors net sold USD 1.13 bn of local debt over three sessions, before moving past EGP 56 this week. Importers haven’t yet started hedge pricing — building a cushion into their selling prices to cover where the rate might go over the next three months — because they hope the Hormuz crisis ends soon, El Malwani says. For now, they’re pricing imported goods at the exchange rate on the day a shipment enters the country, he adds.

The port bill

Delays at the ports add a hard-currency cost of their own. Storage and demurrage average about USD 150 per container a day, varying with container size, port, and storage location, El Arjawy says. To bring that down, he calls for temporary emergency measures, starting with letting most containers leave the port straight for importers’ warehouses under provisional release. Customs would then carry out its checks through post-clearance review, he says.

Transit cargo faces its own hurdle in Advance Cargo Information (ACI) pre-registration. Customs suspended ACI for Gulf transit in March, after the Strait of Hormuz closure cut the Gulf’s main trade route. El Arjawy proposes scrapping ACI for all transit cargo instead of limiting the exemption to Gulf transit.

Preferential trade agreements are another source of delay: Importers wait several days while Customs verifies whether their shipments qualify for exemptions, running up storage charges in the meantime, El Arjawy says. He proposes applying the exemptions as soon as goods arrive, with Customs collecting any duties later if a shipment turns out not to qualify. Most goods are getting through: goods worth more than USD 65 bn have cleared Egyptian ports since January, with less than USD 5 bn still waiting, Al Borsa reports, citing government sources.

Holding prices at the factory gate

Food manufacturers are getting what they need too, says Ashraf El Gazayerli, chairman of the Chamber of Food Industries at the Federation of Egyptian Industries, with FX sourcing running normally under CBE directives and inputs clearing ports without obstacles. That gives factories little reason to raise prices, which he calls “the last option” for any manufacturer while consumers’ purchasing power is still recovering.

Competition is another brake: With more than 30k establishments registered with the chamber and recession fears in the air, producers have to compete on price to hold on to market share, El Gazayerli says. Food makers earn their money on volume by moving inventory faster, and running closer to capacity, he adds.

Shoppers are paying more anyway, because of what happens after goods leave the factory. Some traders are selling above the price they pay manufacturers as consumers stock up on fears of shortages, says Hazem El Menoufy, a member of the food trade chamber at the Federation of Egyptian Chambers of Commerce. That has pushed up consumer prices for cheese and some edible oils, he says. The federation is tracking these markups with a price radar that flags distributors raising prices when the manufacturer hasn’t, he adds.

The government is running its own low-cost retail network alongside the market. Supply Minister Sherif Farouk told the Senate yesterday that the price reduction initiative covers 30 basic commodities at reductions of up to about 25%, through 284 outlets spanning 190 markaz — and that the ministry is expanding its own price radar, the unified complaints system, and the inspector card to track price movements and violations.

WHAT’S NEXT- The CBE’s Monetary Policy Committee meets on Thursday, and most analysts we surveyed expect a hold even as the EGP weakens. Annual urban inflation eased to 13.9% in September, but monthly prices rose 1.3%, up from 0.1% in August. A hike would do little against inflation driven by global costs and would add to the state’s interest bill, the hold camp argues. A minority sees a hike back in play, pointing to the weaker EGP and foreign selling of local debt, which a higher rate could help slow.

Wheat imports pick back up

Egypt’s state wheat buyers are importing again, with shipments already unloading at Egyptian ports this month, a senior government source tells EnterpriseAM. The state hadn’t bought a cargo since May, but the pause was seasonal, the source says, with silos full after a largely successful local harvest. Total wheat imports still rose 1.9% y-o-y to some 9.03 mn tons in January-September, since private importers kept buying throughout, according to the source.

Talk of a slump in wheat imports doesn’t hold up over the full year, says Mohamed El Mansy, head of Agricultural Quarantine. “Wheat shipments haven’t stopped completely. A drop in imports in some months doesn’t necessarily mean lower total volumes over the year,” El Mansy tells EnterpriseAM. Any decline is likely limited to government purchases after the state took in large volumes of local wheat, he says, while the private sector has kept importing to cover its needs.

The supplier mix is shifting, however: Russia and Ukraine supplied some 84% of Egypt’s wheat imports in January-August, before Russian attacks on Ukraine’s ports halted its grain shipments. Russian contracts have also been affected to some extent, the source says, so the state has booked cargoes from France, the US, Poland, and others, using spot purchases to keep supply regular. Pakistan and Mexico have recently joined the approved list, which now covers 22 origins, with state buyer Mostakbal Misr awarding contracts on price, the source adds.

Imports should rise again in November and December as Egypt fills the gap until next year’s harvest, according to the source. The source sees more storage as the key to buying more from local farmers: limited capacity let the state take in only about 5 mn tons this season, roughly half of an estimated 10.3 mn-ton crop.

The capacity gap is quantified: The Supply Ministry puts silo storage at 4.4 mn tons across 85 silos, up from 1.2 mn tons in 39 silos in 2014, and is targeting 6 mn tons by 2030, Farouk said.