The ceramics division in the Federation of Egyptian Industries (FEI) and the Ministry of Industry have demanded an intervention from the prime minister in order to decrease the prices of the gas provided to factories to $3 per 1m thermal units, similar to global prices and competitive markets in the ceramics industry.
The price of the gas exported to ceramics factories has increased from $1.25 per 1m thermal units in 1996 to $2.65, then to $3 before the significant increase in July 2014, when it increased to $7 per 1m thermal units, a 114% increase, said head of the division and member of the Board of Trustees in El Sadat city, Sherif Afifi.
The US dollar price used to be EGP 5.5 but now it is nearing EGP 9, which has led to huge increases in production costs. This has taken away the competitive edge Egyptian products used to have over its counterparts in the region, such as Turkey, Iran, the Emirates and Saudi Arabia.
Gas prices used to represent 5% of the total cost of the product, however, now it represents 25% of the product compared to competing countries, where gas prices do not exceed $0.5 or $1.5 per 1m thermal units.
According to Afifi, increasing gas prices has led to lowering the production capacity of ceramics factories to just 30% to 35%. Exports were halted to several markets due to the increase in costs, including Jordan, Lebanon, and Saudi Arabia. One factory has shut down and the exports volume has declined by 50%.
The increase in the US dollar exchange rate against the Egyptian pound has negatively impacted the ceramics industry. The price of raw materials in the quarries has increased by 25%, as well as the cost of transporting these raw materials.
The ceramics division prepared a study and submitted it to the FEI. The study included a presentation on the history of the ceramics industry in Egypt, which began in 1975 by two companies. The industry evolved and grew rapidly, reaching 33 companies and employing 240,000 workers.
According to the study, ceramics exports declined from $398m in 2012 to $178m in 2015 compared to the high volume of imports from $51m in 2012 to $84m in 2015.
The study confirmed that reducing the cost of imported gas for the ceramics industry will increase the state’s foreign currency income by about $200m a year. Corporate needs $120m of this to recover foreign markets, and $80m to provide the value of ceramic imports, as well as providing many job opportunities.
The division is doing research on opening new markets especially for exports in East African countries. According to the head of the division, Egyptian companies will participate in an exhibition in Tanzania for building materials for the first time next month. The competition in the African markets is difficult in light of the low prices of the product in competitive states.