Libya dents Egypt polypropylene

One player suffers from feedstock cuts caused by Libya’s civil war. Another spots a chance to grow

Polypropylene (PP) production in Africa is mostly limited to its three major economies – South Africa, Egypt and Nigeria.

Currently, South Africa has the biggest PP production capacity of any African country, with 630,000 tonnes/year of production capacity at Sasol and Safripol.

Libya’s Ras Lanuf refinery on fire. It supplied feedstocks to the Egyptian PP sector Copyright: RexFeatures

Egypt comes a close second, with a combined production capacity of almost 560,000 tonnes/year at producers Egyptian Propylene and Polypropylene Co (EPPC) and Oriental Petrochemicals Co (OPC).

However Egypt’s chief source of PP supply has shifted from OPC to EPPC over the past year. PP production at OPC has been “put on hold” for approximately a year now after the company stopped receiving propylene from Libya, industry sources confirm.

EPPC, on the other hand, has easy access to propane-based propylene sourced within Egypt, which gives it a competitive advantage. “By the time OPC was out, EPPC was there,” a trading source said. EPPC has capacity to produce 400,000 tonnes/year each of feedstock propylene and PP at Port Said. However, PP plant operations at the site became stable only in early 2011, when its feedstock instability was resolved, a source at EPPC said.

“EPPC started production early 2011 with [homopolymer PP] raffia, fibre and BOPP [biaxially oriented polypropylene]. The plant capacity [for PP] is now up to 400,000 tonnes/year,” said the source.

A trader who visited Egypt earlier this year acknowledged EPPC’s proximity to refineries meant it had a feedstock advantage over OPC, which had been importing its propylene from Libya. OPC has PP production capacity of 160,000 tonne/year at Sokhna. The company could not be reached for comment. EPPC is a 50:50 joint venture between OPC and Egyptian Petrochemicals Holding Company (EChem). Next year, EPPC is planning to produce block copolymer PP, the source at the company has confirmed.

EPPC currently produces homopolymer PP which is mainly used in the agricultural sector. The copolymer PP will be produced by the same plant, and the company is looking into sourcing feedstock ethylene.

“We are planning to produce [copolymer] from the first or second quarter of 2013,” the source said. EPPC will not produce less homopolymer PP because of the decision to produce copolymer PP, the source confirmed.

“We can make 100% [homopolymer from the plant], or [copolymer] – we will be flexible depending on market needs,” the source said. However, the market for copolymer PP in Egypt is smaller than for homopolymer PP.

Homopolymer PP is highly sought-after for agricultural applications. Demand is also supported by Egypt’s carpet industry. Meanwhile, copolymer demand is most likely to come from the injection moulding sector.

Run rates at EPPC’s PP plant were expected to improve after it restarted the unit in October after a month-long shutdown. The plant at Port Said was shut down towards the end of September because of technical difficulties.

The company then decided to use the shutdown to ramp up its PP plant run rates to 85-90% from 70%. However, any actual improvement in run rates could not be confirmed.

Meanwhile, the shutdown led to the Egyptian government freezing a recently imposed 15% import duty on PP from the Gulf Cooperation Council (GCC) for an indefinite period. Egypt’s Ministry of Industry and Foreign Trade is yet to re-impose the import duty.

The GPCA industry group insists the new levy was not in accordance with WTO rules and regulation and is negatively affecting the Egyptian conversion sector, which has opposed the measure. PP exported by GCC producers had become unattractive in Egypt after the government set the import duty on PP for a period of 200 days starting 5 June 2012.

Meanwhile, all eyes are on Libya’s cracker at Ras Lanuf because of its implications for OPC’ feedstock supply. The cracker is unlikely to restart before the end of the year, a National Oil Corp (NOC) source confirmed in late October. The cracker, which has the capacity to produce 330,000 tonnes/year of ethylene and 170,000 tonnes/year of propylene, was shut down in February 2011 at the onset of the Libyan civil war.

The NOC source said that there were “many issues” to resolve before restart would be possible, including feedstock specification issues and mechanical problems.

Egypt might need all the PP it can get, and from multiple sources, as, according to the World Economic Outlook report released by the International Monetary Fund (IMF), its GDP is set to almost double to 3.3% in 2013.

Additional reporting by Nel Weddle