Export problems facing the manufacturers of alkyd resins are crippling the industry, reportsAhmed Kotb
Exports of more than $200 million are threatened by the halt in alkyd resin production
Many Egyptian manufacturers of alkyd resins, raw materials used in manufacturing paint, coatings, ink and other chemical products, have stopped operations at their factories due to an inability to export their products.
The customs authority has refused to allow the resins to leave Egypt’s ports following a report from the Egyptian General Petroleum Corporation (EGPC) saying that the products contained kerosene, a petroleum product subsidised by the government.
The previous government decided in March 2012 that the customs authority should stop products manufactured with subsidised petroleum products from being exported without the permission of the EGPC.
The decision was based on ministerial decrees number 6/2012 and 9/2012, which were intended to prevent the smuggling of subsidised petroleum products, costing the country billions of pounds.
The manufacturers of the alkyd resins have not been able to export their products since then, and the industry has been suffering losses because a large proportion of production is directed to exports.
“Our factories have closed down because our production depends mainly on exports, which have stopped,” said Mohamed Shaaban, manager of Chemical Partners Egypt (CPE), which manufactures alkyd resins.
It used to export the materials to a value of $15 million annually and had a production capacity of 50,000 tonnes per year. More than 60 per cent of the company’s production was exported.
Shaaban said that the EGPC had mistakenly reported that CPE used kerosene, and the customs authority had refused to give the company’s products the green light to leave the ports.
The EGPC issued a report in October 2012 following laboratory tests that said that CPE’s alkyd resins contained 30 per cent kerosene. It demanded that CPE pay LE1.6 million in fines for the illegal use of a subsidised material.
“We use white spirit, a non-subsidised petroleum distillate, which has very similar components to kerosene and can be easily mistaken for the subsidised petroleum product,” Shaaban stated, adding that other problems had surfaced to add to the sufferings of the industry.
Mahmoud Suleiman, deputy head of the chamber of chemical industries at the Federation of Egyptian Industries, said that the crisis had been aggravated by another government decision to impose a sales tax on every litre of alkyd resin sold instead of on every tonne.
The price of white spirit had also increased three times in 2012, surpassing international prices.
Such increases represented a serious problem because the law did not allow for the import of white spirit, thus giving an advantage to competitors in international markets.
“Exports of materials using the resins were estimated at $200 million annually. But they decreased in 2012 to less than $50 million as a result of all the problems we are facing,” Shaaban said.
He said that his company had petitioned prime minister Hisham Kandil to allow alkyd resin products to be exported with immediate effect. He would be sending samples of the products to the Ministry of Industry and foreign trade to demonstrate that kerosene or other subsidised products had not been used in their production.
The minister of finance, said Shaaban, responded to one of our petitions by asking the head of the central, southern, and middle area to allow alkyd resin exports from the 10 Ramadan port without waiting for the results of the laboratory tests that will decide if kerosin is used in production, and that EGPC shall take any necessary actions if such a violation is reported. “The minister’s decision is a positive move towards solving the problem, but one customs port is not enough at all”
“The industry has lost many international clients. We cannot afford to lose others,” Shaaban said.
The customs authority has refused to allow the resins to leave Egypt’s ports following a report from the Egyptian General Petroleum Corporation (EGPC) saying that the products contained kerosene, a petroleum product subsidised by the government.
The previous government decided in March 2012 that the customs authority should stop products manufactured with subsidised petroleum products from being exported without the permission of the EGPC.
The decision was based on ministerial decrees number 6/2012 and 9/2012, which were intended to prevent the smuggling of subsidised petroleum products, costing the country billions of pounds.
The manufacturers of the alkyd resins have not been able to export their products since then, and the industry has been suffering losses because a large proportion of production is directed to exports.
“Our factories have closed down because our production depends mainly on exports, which have stopped,” said Mohamed Shaaban, manager of Chemical Partners Egypt (CPE), which manufactures alkyd resins.
It used to export the materials to a value of $15 million annually and had a production capacity of 50,000 tonnes per year. More than 60 per cent of the company’s production was exported.
Shaaban said that the EGPC had mistakenly reported that CPE used kerosene, and the customs authority had refused to give the company’s products the green light to leave the ports.
The EGPC issued a report in October 2012 following laboratory tests that said that CPE’s alkyd resins contained 30 per cent kerosene. It demanded that CPE pay LE1.6 million in fines for the illegal use of a subsidised material.
“We use white spirit, a non-subsidised petroleum distillate, which has very similar components to kerosene and can be easily mistaken for the subsidised petroleum product,” Shaaban stated, adding that other problems had surfaced to add to the sufferings of the industry.
Mahmoud Suleiman, deputy head of the chamber of chemical industries at the Federation of Egyptian Industries, said that the crisis had been aggravated by another government decision to impose a sales tax on every litre of alkyd resin sold instead of on every tonne.
The price of white spirit had also increased three times in 2012, surpassing international prices.
Such increases represented a serious problem because the law did not allow for the import of white spirit, thus giving an advantage to competitors in international markets.
“Exports of materials using the resins were estimated at $200 million annually. But they decreased in 2012 to less than $50 million as a result of all the problems we are facing,” Shaaban said.
He said that his company had petitioned prime minister Hisham Kandil to allow alkyd resin products to be exported with immediate effect. He would be sending samples of the products to the Ministry of Industry and foreign trade to demonstrate that kerosene or other subsidised products had not been used in their production.
The minister of finance, said Shaaban, responded to one of our petitions by asking the head of the central, southern, and middle area to allow alkyd resin exports from the 10 Ramadan port without waiting for the results of the laboratory tests that will decide if kerosin is used in production, and that EGPC shall take any necessary actions if such a violation is reported. “The minister’s decision is a positive move towards solving the problem, but one customs port is not enough at all”
“The industry has lost many international clients. We cannot afford to lose others,” Shaaban said.
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