Egypt Edition 
UAE Edition 
Saudi Edition 
MENA <> India Corridor 
Logistics (MENA) 
Climate (MENA) 
Share
Read Full Issue 
Fertilizer manufacturers are set to soon face higher gas prices as the government seeks to narrow the gap between the buying and selling prices, driven by the increase in global energy prices amid the war, Chemical and Fertilizers Export Council Chairman Khaled Abu Al Makarem tells EnterpriseAM.
Under the plan, natural gas sent to fertilizer producers will be priced based on the international going rate for fertilizers, with a flexible formula to be implemented that will see gas prices fluctuate in relation to export prices, Abu Al Makarem explained. Sharing the expense is intended to strike a balance between production costs and export returns, as Egyptian export prices have risen by around USD 125 per ton to USD 610-625.
Why this matters: For producers of nitrogen-based fertilizers like urea and ammonia in Egypt, natural gas accounts for roughly 70% of production costs, as it's the raw energy source used to power the process and the primary feedstock. The cost of gas — which in Egypt has been pretty competitive on a global scale — is what creates or reduces margins and makes or breaks the competitiveness of output on a global market.
No official decision has yet been received notifying producers of price hikes, but it is expected that the increase will be gradual, according to Abu Al Makarem. While many producers already hold sizable gas reserves to keep production ongoing, these reserves will not eliminate the impact of future price increases.
Cushioning the blow could be permission from the state to increase exports, as it balances between local market needs and the need to secure hard currency revenues, although no official decision has been issued in this regard, Al Makarem added. Local fertilizer producers are finding strong demand in international markets as the closure of the Strait of Hormuz shuts off exports from fertilizer producer heavyweights like Saudi Arabia, Qatar, and the UAE, along with export restrictions by other exporting nations like China.
Local farmers will also feel the impact with the expected gradual price increases, but the state is keen to maintain manageable prices in the local market to make sure domestic food production isn’t significantly impacted.
Markets were quick to react as the story was picked up by several local outlets yesterday. Abu Qir Fertilizers’ share shed 5.2% during the session, Kima lost 2.2%, and Valmore Holding fell 1.8% amid a broad sell-off that only saw two components of the EGX30 finish the day in the green.
