Disruptions In Red Sea Shipping Routes Will Restrict Egypt-Based Drugmakers Access To Essential Raw Materials
Dwindling pharmaceutical raw material supplies will force Egypt-based drugmakers to operate at lower capacity. Egypt is one of the largest producers of pharmaceuticals in the MENA region, with an estimated pharmaceutical market valued at EGP134.1bn (USD4.5bn). However, despite its extensive domestic manufacturing capacity, Egypt’s pharmaceutical industry remains heavily import-dominated, with around 90% of raw materials sourced from abroad. In 2022, unfinished pharmaceutical products and organic chemicals (including pharmaceutical raw materials) were among the most imported goods from China and India, representing 4.3% and 2.9% of Egypt’s total imports respectively. While the government has initiated preliminary discussions with the private sector to establish domestic factories for pharmaceutical raw materials, these initiatives are still in their early stages and are unlikely to materialise in the near term. As such, we expect Egypt-based drugmakers to remain vulnerable to the trade disruption in the Suez Canal, which would impact access of imported raw materials and the overall availability of pharmaceutical products in Egypt.
The current supply disruption of raw pharmaceutical material is further exacerbated by a weak Egyptian pound and a lack of USD reserves to clear imports of pharmaceutical materials. In H2 2023, over 150 shipments of finished and unfinished pharmaceuticals, worth an estimated USD100 million, have been detained in ports and airports due to the inability to clear these imports, underscoring the severe supply chain challenges facing Egypt’s pharmaceutical sector. Domestic drugmakers are struggling to maintain a profit margin, grappling with the high costs of clearing raw material imports and the inability to offset the increased operational costs by raising medicine prices, given the caps enforced by government regulations. As a consequence, companies have been forced to reduce their manufacturing outputs to maintain financial viability. On this note, Jamal El-Leithy, the head of the Pharmaceutical Chamber of the Federation of Egyptian Industries, has noted that domestic factories are operating at only 70% capacity, leading to severe shortages of essential pharmaceutical products, including antibiotics and diabetes medications.
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