{"id":630764,"date":"2024-07-07T00:00:00","date_gmt":"2024-07-07T00:00:00","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/inside_industry\/how-egypts-ceramics-sector-is-navigating-challenges-stemming-from-natgas-shortages\/"},"modified":"2024-07-07T00:00:00","modified_gmt":"2024-07-07T00:00:00","slug":"how-egypts-ceramics-sector-is-navigating-challenges-stemming-from-natgas-shortages","status":"publish","type":"inside_industry","link":"https:\/\/enterpriseam.com\/egypt\/inside_industry\/how-egypts-ceramics-sector-is-navigating-challenges-stemming-from-natgas-shortages\/","title":{"rendered":"How Egypt\u2019s ceramics sector is navigating challenges stemming from natgas shortages"},"content":{"rendered":"

The lates<\/strong>t casualty of the gas shortage: Ceramics. <\/strong>Egypt\u2019s ceramics industry is facing a number of challenges amid the nationwide natural gas shortage, which has led to a considerable decline in production and exports. Enterprise spoke to a number of industry players to learn more about how the ceramics, porcelain, and sanitaryware sectors are navigating these challenges and what needs to be done to revive the industry and go back to normal production rates.<\/p>\n

REMEMBER- It\u2019s not just ceramics. <\/strong>Fertilizer companies<\/a> have been struggling to keep the lights on and operations ongoing amid the ongoing gas shortage, with many having to pause operations time and time again.<\/p>\n

The context:<\/strong> The nation\u2019s power crisis and shortage of gas supplies has forced major companies from energy-intensive fertilizer industries to halt operations. The government recently secured 20 LNG shipments<\/a> as it works to ensure it has sufficient supplies for households and factories during the current period of increased demand expected to last till September.<\/p>\n

In numbers: <\/strong>Egypt currently houses 33 ceramics factories, and has a large amount of the raw materials used by the industry, according to data from the Chamber of Building Materials Industries (CMBI). The sector employs over 100k workers.<\/p>\n

Local components make up between 80-90% of the sector\u2019s production inputs<\/strong> and the output covers \u2014 and even exceeds \u2014 local demand. However, further incentives from the government are needed to help increase exports of ceramics.<\/p>\n

The float caused a surge in gas prices: <\/strong>The decision to float the EGP was translated into a 55% increase in natural gas prices for ceramics factories, pushing production costs up to the point where they were higher than their foreign counterparts, subsequently causing a drop in exports, 10th of Ramadan Investor Association Vice President Sobhi Nasr told Enterprise. Domestic sales also declined, the association said in a report, which further increased the companies\u2019 losses.<\/p>\n

The float had a direct impact on the sector:<\/strong> The ceramics and brick industries\u2019 prices are specifically linked to the USD exchange rate, which further worsens the sectors\u2019 woes, CMBI head Ahmed Abdel Hamid tells us. That paired with the dip in sales led many companies to accumulate debts owed to the state\u2019s Egyptian General Petroleum Corporation and the Electricity Ministry. <\/p>\n

Ceramic exports are a major source of FX: <\/strong>When operating at full capacity, ceramics producers could generate exports of USD 400 mn. But, our ceramics exports recorded USD 80 mn last year, a 60% decrease in comparison to the USD 200 mn recorded in 2021.<\/p>\n

THE SOLUTION- <\/strong> Industry players Enterprise spoke to proposed a number of ways to help out the industry: <\/p>\n

1- Pricing natural gas in EGP <\/strong>instead of USD. Pre-float natural gas was going for EGP 145 per mn British thermal units (BTU) \u2014 around EGP 5 per cbm. <\/p>\n

2- Slashing the price of natural gas<\/strong> for the industry to USD 3 per mn BTU;<\/p>\n

3- Pricing natural gas based on the pre-float USD price <\/strong>\u2014 when it stood at EGP 30.8 \u2014 and making sure it doesn\u2019t fluctuate.<\/p>\n

Could green energy be the answer? <\/strong>Although it could be an opportune time for factories to kickstart their transition to renewable energy, this would require even more financial support and funding, sector sources told Enterprise.<\/p>\n

To tackle the problems: <\/strong>The 10th of Ramadan Investor Association went to the government with the array of challenges facing the sector in efforts to find a solution with the aim of increasing the sector\u2019s total exports to around USD 400 mn annually.<\/p>\n

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Your top industrial development stories for the week:<\/strong><\/p>\n