EGYPT SOFTWOOD MARKET

Transcription

1 66 th International Softwood Conference Riga, October 12 th, 2018 EGYPT SOFTWOOD MARKET Ibrahim Elshal CEO & Purchasing Director ELSHAL TIMBER

2 Starting From The End of Last Year Presentation Let s Hope The Trend of Import Chart Will Change Next Year

3 General market situation in H (Supply/Demand balance, prices and profits)?

4 General market situation in H (Supply/Demand balance, prices and profits)

5 If It s Your First Time To Know About Egypt Timber Market i The biggest population in MENA region. ~ 100 Million. i No forests in Egypt. i Fully dependent on imports to fulfill its need of Softwood. i No wooden homes or buildings. i For historical and basic information about Egypt Timber Market: 1) EOS annual report 2015/2016: Special focus on Egypt, page ) My presentation for ISC-2016 in Paris - 3) EOS annual report 2016/2017: Special focus on MENA, page 60-67

6 Still The Leader of MENA Softwood Market MENA SOFTWOOD IMPORT 2017 IRAN 8% Other 17 Cuntries 16% EGYPT 41% UAE 6% MOROCCO 8% SAUDIA ARABIA 12% ALGERIA 9% In 2017, Egypt imported ~4 mil. m3 out of 9.7 mil. m3 In 2016, Egypt imported 4.4 mil. m3 out of 11.4 mil. m3 MENA imports 108% compared to all Middle East countries. KSA, UAE, Iran, Jordan, Lebanon, Iraq, Kuwait, Qatar, Yemen, Bahrain and Syria 65% of North Africa softwood import Egypt, Algeria, Morocco, Tunisia, Libya and Sudan Main & Long-term Buyer of European and Russian Softwood. Data source: WOODSTAT

7 Our Forecast & Estimates in October 2017 at ISC in Hamburg The growing and young population will still a guarantee of demand. Presidential election between Feb-May 2018 likely to be very smooth and political situation is overall stable. Economic problems will remain, but for the short-term, government borrowing strategy will postpone any severe crisis. Construction market is about to recover from the EGP flotation shock. Softwood monthly imports reached the bottom and already started to recover. Import of ~ 3.5 million m3 is expected for 2017 and ~ 4 million m3 for 2018.

8 Demographic Figures Population: ~ 100 million Growth rate: 1.9% - (in EU = 0.08%) Midian age: 25 - (in EU = 42) Unemployment rate: 9.9% - (from 12.6% in Jul-17) ~ 97% of population live on ~ 5% of land. Population (Source: Worldometers) Population growth rate (Source: Worldometers) Population distribution (worldpopulationreview.com) Source: World population review, Worldometers, CAPMAS and World Bank

9 Economics GDP in 2017: 235 billion USD. GDP growth H1 FY-17/18: 5.2% (4.2% FY-16/17) Budget deficit % of GDP 2017: 11.4% Forex reserves in Aug-18: 44.4 bil. USD (36.4 bil. Aug-17) External debt Mar-18: 88 bil. USD. (Mar-17: 74 bil.) National debt % of GDP 2017: 103% (2016: 97%) Foreign Exchange Reserves in Million USD (Jan-16 to Sep-18) $44 bil. Total External Debt in Million USD (Sep-15 to Mar-18) $88 bil. $36 bil. $74 bil. $53 bil. $17 bil. P No more FOREX problem! But the increasing debt is a concern! Data source: World bank, Trading Economics, Statista, CBE

10 Economics USD/EGP official rate: (17.70 last year) Customs USD rate stabled at USD/EGP Inflation rate Aug-18: 14% (Aug-17: 32%) Interest rate: 16.75% (18.75% in Oct-2017) CBE May-18: Bank-to-Bank documents is not obligatory Now, prepayments can be done with almost all banks EGP/USD Official/Parallel rate (10/ /2018) 21,00 20,00 Inflation Rate (09/ /2018) 19,00 18,00 17,00 16, % 15,00 14,00 13,00 12,00 11,00 Parallel Official 14% 10,00 9,00 8, ,00 Data source: CBE, Company data (Elshal Timber)

11 Economics The Economic Reform Program Is Underway... Cutting subsidies on multiple services including electricity, fuel and public transportation. Activating the new law of real estate tax on residential and commercial property. Privatization: Finance minister Amr Elgarhy (March 2018): Egypt aims to raise $4.6 bln from privatization. Source: Reuters and other sources

12 Economics President El Sisi and I discussed the good progress under Egypt s economic reform program supported by the IMF s US$12 billion Extended Fund Facility. Egypt s economy is showing strong signs of recovery Mrs. Christine Lagarde, IMF Managing Director September 23, 2018 IMF Country Focus July 17, 2018 Egypt Moving Forward: Key Challenges and Opportunities As Egypt begins to modernize its economy and make it more competitive, it will also need to continue to bring down public debt to a level consistent with long-term sustainability Source: IMF

13 Construction Market Several ongoing projects and other new projects were planned The New Capital: Construction is underway. 20 towers planned to be built in the business district, one of them should be the highest in Africa (385 m). Russian Industrial Zone: May-18, Egypt and Russia signed a 50-year industrial zone agreement, to be built on 5.25 mil m2 on Suez Canal Economic Zone that Egypt hopes will attract up to $7 billion of investments. 20 cities 4 th -generation : on 10-Sep-18, PM announced: "Egypt to construct 20 fourthgeneration cities to accommodate 30 million citizens and provide job opportunities New 6th of October City: ~ 33,000 Hectares New Alamein City: ~ 20,000 Hectares, ~ 100 km away from Alexandria. Other New Cites: New Mansoura, October Gardens, New Obour and West-Qena City The private sector still keep the leadership of housing market. A construction site in Egypt's new administrative capital Dwelling units built in urban by sector (x1000) Source: CAMPAS, Reuters, NBC news, Egypt today

14 Construction Market Construction Market Forecast For The Next Year: Planned infrastructure and public projects likely to continue after government succeeded to overcome the financial obstacles. Private sector will likely continue investing in housing projects because of the high profit margin. The growing and young population can maintain a continuing demand, BUT the fallen purchasing power is a concern. Concerns about supply-demand balancing, since majority of Egyptian people cannot afford the very high housing prices in the new cities and new housing projects. Photo: A construction site in the New Alamein City (source: Almasry Alyoum)

15 Softwood Supply & Demand Situation Pine supplies recovered a bit from the monthly bottom level in Dec-2016 Spruce demand is almost stable during last 2 years 40,000-50,000 m3/month mainly of lower grades Data source: WOODSTAT

16 Softwood Supply & Demand Situation Finland is keeping the biggest share for the 2 nd year Swedish share remarkably decreased during Jan-Jul 2018 Russian share increased and expected to continue till the end of 2018 and Q1/19 Softwood Imports (1 000 m³) From Main Exporters Jan-Jul 2016 Jan-Jul 2017 Jan-Jul /2017 Finland % Russia % Sweden % Latvia % U.S % Romania % Canada % Others % TOTAL % Yearly Softwood Imports (1 000 m³) - Main Exporters Finland Sweden Russia Baltics Romania U.S Canada Others TOTAL Change % 11% -14% 10% Source: Woodstat

17 Softwood Stock & Price Situation In Egypt Local prices stopped rising in May-June. In June-July, Siberian mills started to accept Egypt prices for bigger volumes. In June-August, local prices were stable. But 2 weeks after the end of Ramadan, demand started a gradually slowing down. During August, Russian offers remarkably increased. Stocks were increasing gradually because of the poor demand. From end of August, local prices were decreasing gradually. At the end of September, stocks reached a very high levels. Recently, many visits from European and Russian producers. Notes to consider while negotiating sales until the end of the year: Generally, Egyptian importers don t like to buy big volumes now, even after a slight price decrease. For some of them, it will not be a matter of price, it'll be a matter of high-stock and/or non-sufficient funds. For those who can buy and pay, more likely, they'll need a price safety margin to avoid new losses. RW sizes (19/25 X 150/175/200 mm) are more preferred now than other sizes. Source: Woodstat, (Elshal Timber)

18 Rejection and Re-exporting of Some Belarusian Radioactive Softwood Shipments After chernobyl disaster, it s a regular procedure in Egypt that imported timber from Russia or any other former Soviet-Union country must be subject to Radiation Inspection. Routinely inspection was usually done in few minutes in the port using a Radioactive detection device. Egypt was importing Ukrainian and Belarussian timber and we never heard about a single contaminated shipment for many years ago. On January 19, the Belarusian ambassador declared Belarusian company Atomtex is visiting Egypt to discuss the cooperation in the field of Radiation Monitoring! In February 2018, a high level of radioactivity has been detected in a small shipment of Belarusian softwood which was shipped from Riga. A higher inspection committee came from Cairo to Alexandria and they confirm that the shipment is contaminated and must be re-exported. From this date, we have a very strict and sensitive radioactive inspection for any Ukrainian or Belarussian timber. Majority of shipments were accepted, but authorities detected some other contaminated shipments which shipped by both bulk-vessels and containers and they reject them, so they must be re-exported. Source: agri.ahram.org.eg

19 Summary & Forecast For The Next Year Political and security situation more likely will remain stable. With the government economic strategy, likely we are far away from any big crisis, but for the long-term, the very high debt level is a concern. Infrastructure and public projects likely will progress at the same level. Young and fast growing population should maintain housing demand, but there is a concern about the high prices and balance between supply and demand. Now, Egypt Softwood market already oversupplied, stock is very high and this will affect the volumes of imports and prices until Dec-18 or Jan-19. During Q1 2019, we expect to reach supply-demand balance, then, prices expected to reach relative stable levels, then imports volume start recovering.

20 Let s hope this will not be the photo to express the market situation in 2019 Mr. Bean sleeping in the roller coaster

21 Thank You For Your Attention! Paldies par jūsu uzmanību! For any questions: