Egypt Raises Gas Prices for Industries by up to 75%

The Egyptian government on Saturday slashed its natural gas subsidies to several industries, increasing gas prices by 30-75 percent as part of a broad government strategy to cut back subsidies that eat up to a fifth of its annual budget.

The new cut which was announced in the state's official gazette came immediately after a decision to reduce car fuel subsidies, raising mainstream fuel prices up to 78 percent. Egypt's government, appointed last month by the newly elected President Abdel-Fattah El-Sisi, said it was determined to tackle the burden of subsidies and cut most within five years.

Saturday's decision would increase the price of natural gas for cement factories to $8 per one million thermal units (mtu) instead of $6. "The gas price ceiling for all Industries was $4 per mtu, but the government raised the price of cement last year to reach $6," Osama Kamal, former petroleum minister, told Ahram Online.

It is not the first fuel rise for the energy-intensive industry, as the government decided in December 2012 to raise fuel prices for cement companies that use mazut diesel by 130 per cent, meaning per-tonne mazut prices rose from LE1,000 ($140) to LE2,300 ($322).

In February 2013, the government reversed part of the rise to ease the outrage of the country's large cement companies, so the low-quality fuel has stood at LE1,500 ($210) per tonne since then. There are around 20 cement factories in Egypt consuming roughly nine percent of the total amount of natural gas produced in Egypt, coming in third place after the electricity and fertiliser sectors.

"It's a one hundred percent right decision, as the cement companies were getting the subsidised gas then selling their production in the domestic market with overvalued prices," Ahmed El-Zeiny, the head of the building material division at Cairo Chamber of Commerce told Ahram Online.

Cement prices currently range from LE650 ($91) to LE750 ($105) per tonne nationwide; however, the production cost does not exceed LE300 ($42) per tonne, according to El-Zeiny.

In April after months of debates and fierce battles between the Ministry of Environment and the cement sector, the Egyptian cabinet announced that they will allow the import of a coal for power generation within cement factories. Coal will be cheaper than natural gas or mazut.

The decision on Saturday sees the price of natural gas for the iron, steel, aluminium, copper, ceramic and glass industries rise from $4 to $7 per mtu. Electricity companies nationwide will get the natural gas at $3 per mtu instead of $1.8.

The natural gas for fertilisers and petrochemicals industries will cost $4.5 per mtu, while the gas price for the food, textile and pharmaceutical industries will remain $5 per mtu. For cars that are powered by natural gas instead of petrol or diesel, a cubic metre will be sold at LE1.10 ($0.15) up from LE0.40 ($0.06).

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