{"id":557547,"date":"2021-09-22T03:59:37","date_gmt":"2021-09-22T03:59:37","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/hardhats\/fitch-upbeat-on-egyptian-fertilizer-industry-on-rising-production-exports\/"},"modified":"2021-09-22T03:59:37","modified_gmt":"2021-09-22T03:59:37","slug":"fitch-upbeat-on-egyptian-fertilizer-industry-on-rising-production-exports","status":"publish","type":"hardhat","link":"https:\/\/enterpriseam.com\/egypt\/hardhats\/fitch-upbeat-on-egyptian-fertilizer-industry-on-rising-production-exports\/","title":{"rendered":"Fitch \u201cupbeat\u201d on Egyptian fertilizer industry on rising production + exports"},"content":{"rendered":"

<\/a> Fitch \u201cupbeat\u201d on Egypt\u2019s fertilizer sector on rising production + exports: <\/strong>Production and exports in Egypt\u2019s fertilizer sector will continue to increase between now and 2025, despite recent hikes on export fees, Fitch said in a recent report<\/a>. Egypt is already a major player in the global fertilizer market, and will likely reinforce its position over the coming three years as plateauing domestic consumption and increased production allows companies to increase exports, particularly to the sub-Saharan Africa and MENA regions, the research firm wrote.<\/p>\n

\u201cWe hold an upbeat outlook for Egypt's fertilizer sector<\/strong>, with a number of ongoing and planned projects expected to increase production capacity, especially for nitrogen fertilizer,\u201d Fitch wrote.<\/p>\n

Investments in nitrogen fertilizer are boosting output:<\/strong> Key investments include the new fertilizer complex<\/a> being built by Thyssenkrupp<\/a> for El Nasr Company for Intermediate Chemicals (NCIC) \u2014 under a contract in the \u201cmid-three-digit mn EUR range\u201d \u2014 expected to be operational by 2022. And Dutch fertilizer plant developer Stamicarbon signed a contract<\/a> with Abu Qir Fertilizers in April to revamp one of their urea melt plants, expected to be operational in 2025.<\/p>\n

Phosphate fertilizer production is also growing:<\/strong> Nitrogen fertilizer is more widely produced than phosphate and potash, but phosphate production also seems to be growing. Still, the investment focus on nitrogen means the production gap between the two is expected to widen, Fitch notes.<\/p>\n

The government has acknowledged the importance of the sector<\/strong>, with Trade Minister Nevine Gamea recently saying<\/a> that the government wants to develop the industry.<\/p>\n

But Fitch expects its focus to be on the domestic market:<\/strong> \u201cWe expect the government\u2019s focus to be on the domestic production and demand for fertilizers, rather than promoting exports for the time being,\u201d it wrote in the report, citing the ministry\u2019s recent export tariff hikes.<\/p>\n

Nitrogen export fees have almost quintupled this year:<\/strong> The Trade Ministry has hiked fees on nitrogen exports twice this year in a bid to slow down the pace of exports amid rising global prices and secure local supply. Companies now have to pay EGP 2.5k to export a ton of nitrogen fertilizer<\/a> until mid-2022, up from EGP 550<\/a> at the beginning of the year.<\/p>\n

How much the tariffs impact investment in the sector may depend on whether the government hikes again:<\/strong> \u201cOver the long term, we do not expect protectionist policies by the government to significantly restrict fertilizer export abilities, although a continued increase in export fees could hinder investment in the sector,\u201d Fitch said.<\/p>\n

Some players in the local market expect domestic consumption to increase:<\/strong> The CEO of state-owned Helwan Fertilizers has forecast<\/a> an uptick in domestic demand as the Agriculture Ministry tries to expand the amount of arable land and increase agricultural production.<\/p>\n

But Fitch disagrees<\/strong>, forecasting limited crop production growth between now and the middle of the decade. It predicts that maize, rice and wheat production \u2014 which account for some 60% of the country\u2019s use of nitrogen fertilizer \u2014 will only increase by 0.9-2% over the next four years due to underdeveloped irrigation networks. In addition, the use of nitrogen fertilizer in Egypt is already very high, giving it little room for growth on existing farmland, it said.<\/p>\n

This opens up a chance to increase exports:<\/strong> \u201cAs we believe that crop production growth in Egypt will be subdued over the next five years \u2026 we expect the country to increase its fertilizer exports,\u201d Fitch wrote.<\/p>\n

Demand from our key nitrogen fertilizer export destinations is forecast to remain flat: <\/strong>Demand in Egypt\u2019s top European export destinations, including France, Spain and Greece, are not likely to increase in the coming years, with the EU pushing for reductions in fertilizer use, the report says. In India, a relatively new but growing export destination for Egypt\u2019s nitrogen fertilizers, the government is curbing fertilizer application rates, while also reviving its domestic nitrogen fertilizer industry \u2014 both of which will stymie imports.<\/p>\n

Enter MENA and Africa as new export destinations: <\/strong>\u201cLackluster\u201d consumption in their current principal destinations will see Egypt\u2019s fertilizer exporters seeking new markets, with MENA and Africa important areas for growth, Fitch said. Sub-Saharan Africa\u2019s current low levels of fertilizer consumption will likely be boosted by some governments trying to subsidize private sector fertilizer imports, while the lack of major local producers provides an opening for Egyptian firms to become strategic partners in the region. Still, it notes that significant increases in Africa\u2019s fertilizer imports are unlikely to be seen until almost the end of the decade.<\/p>\n

And phosphate fertilizer exports to the Americas should grow through 2025:<\/strong> Egypt will likely benefit from a reduction of 300k tons in phosphoric fertilizer production capacity in the Americas by 2024, anticipated by the International Fertilizer Industry Association, which will increase import demand in the coming years, Fitch said. Brazil, Uruguay and the US have been the top destinations for Egyptian phosphate fertilizer exports since 2017. In 2018 and 2019, Egypt was Brazil\u2019s largest supplier of phosphate fertilizer.<\/p>\n

Compound fertilizer exports are growing too \u2014 but not at the rate of single-element fertilizers like nitrogen.<\/strong> Egypt isn\u2019t yet a major player in the global compound fertilizer market, and our contribution is likely to remain small through 2025, the report notes. In 2020, we exported only 119k tons of mineral or chemical fertilizer containing at least two elements, compared to the 10.3 mn exported by Morocco. Still, this was a \u201cnotable increase\u201d from the 4.5k tons we exported in 2016, the report notes. New investments do seem to be on the horizon for compound fertilizer production, including Egyptian Financial and Industrial Company reportedly planning a new production line of compound fertilizers, in part to expand its exports.<\/p>\n

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