Fertilizer producers are pushing to almost double the price of subsidized fertilizers

Egypt could soon hike the price of subsidized fertilizers: Urea fertilizer producers are waiting for the government to give them the greenlight to almost double their prices to EGP 8.8k per ton from their current EGP 4.5k.

The rationale: Fertilizer manufacturers have been pushing for the approval to raise the prices of subsidized quantities to offset the increase in cost resulting from the float of the EGP, industry insiders told Enterprise. Producers are currently enduring major losses, as they sell their product for around 48% of its production cost to the Agriculture Ministry — producers are losing some EGP 4k for every ton sold to the ministry, one source told us.

The 55% rule: Urea factories are obligated to sell 55% of their monthly production to the Agriculture Ministry at a subsidized rate in exchange for subsidized natural gas. Producers also have to get the greenlight from the ministry before they can sell off the remaining production — be it locally or abroad.

The float really hit producers hard: Fertilizer producers pay for their natural gas supplies — which represents about 65% of the raw materials used for their production — in the USD equivalent of EGP.

A years’ long crisis: Producers have been struggling since the EGP’s devaluation against the greenback in early 2022 — they have been relying on exports to stay afloat but with global fertilizer prices falling to USD 350 per ton from an average of USD 1k over the past couple of years, relying on exports is no longer an option, a source from a leading fertilizer producer told us.

The government last hiked the price of subsidized fertilizers in November 2021, raising it by 50% to EGP 4.5k per ton.

Adding fuel to the fire: The natgas crisis. The cost issue has been made worse by

disruptions to natural gas supplies delivered to factories. The nation’s power crisis and shortage of gas supplies has forced major companies from the famously energy-intensive fertilizer industry to temporarily halt operations. This meant insufficient production quantities for the factories to meet their export commitments, thus increasing cost pressures, a source at Helwan Fertilizers confirmed to Enterprise.

What's the impact of a price hike on the market? It's natural that increasing the price of subsidized fertilizers will echo through agricultural products, especially knowing that farmers mainly rely on subsidized fertilizers. Additionally, unsubsidized fertilizer prices recently jumped to about EGP 25k per ton due to supply shortages.