Construction boom in Egypt drives chemicals demand, finds Frost and Sullivan

One of the primary reasons for the market's success is the growing population, currently at 2%, as well as the rising middle class, accounting for over 60% of the Egyptian population.

New analysis from Frost & Sullivan (www.chemicals.frost.com), Strategic Analysis of the Egyptian Chemicals Market, finds that the market earned revenue of $11.89bn in 2011 and estimates this to reach $16.43bn in 2016.

The residential and commercial construction boom in 2011 was a result of an increased need for housing and non-residential infrastructure to accommodate the swelling population. As a large percentage of the country's residents are under the age of 39, there is a considerable need for housing and other non-residential buildings, such as schools and hospitals.

Government initiatives to build the residential sector include enhanced housing finance, and private housing upgrades due to higher disposable income. Approximately LE10bn was allocated by the government in the 2011-2012 budget for the National Social Housing Project.

Although Egypt has a wide variety of construction and manufacturing activities, due to a lack of skills and technology, it imports most of its raw materials for local production of paints and coatings, construction chemicals, consumer goods, pesticides, adhesives and sealants, and food additives.

"In the pharmaceuticals sector, more than 85% of raw materials are imported, and a similar trend is observed in the consumer products market, which imports more than 80% of its raw materials," said Frost & Sullivan's Chemicals, Materials and Food Analyst.

"These raw material imports are susceptible to price fluctuations in the international market due to unstable currency, or a fluctuation in the currency exchange rates," he added.

Importing larger amounts of these products, or directly importing raw materials, will help domestic manufacturers reduce their import volumes. They could also establish a short-to-medium term contract with suppliers for a specific price, in order to reduce the impact of price fluctuations.

"Local manufacturing companies unable to procure larger quantities of raw materials need to seek assistance from investors, or establish a payment contract with their suppliers," noted Frost & Sullivan Analyst. "The Government also needs to establish incentives for local raw material manufacturing to decrease the amount of imports, thereby assisting the local raw materials market to thrive."

Strategic Analysis of the Egyptian Chemicals Market is part of the Chemicals & Materials Growth Partnership Services program, which also includes research in the following areas: Paint and Coatings Market in Sub-Saharan Africa, Palm Oil Market in the Personal Care Industry in Nigeria and Ghana, Fuel Production in Sub-Saharan Africa, Lubricants Market in Egypt and Nigeria, and Coatings Market in North, West and East Africa. All research services included in subscriptions provide detailed market opportunities and industry trends that have been evaluated following extensive interviews with market participants.