Local fertilizer plants have gradually raised their prices over the past month by as much as 3,000 Egyptian pounds ($55) a ton, in anticipation of possible increases in natural gas prices or cuts in gas volumes as the government moves to curb consumption amid the current global energy crisis, two leading investors in the fertilizer sector told Al Manassa.
The latest increase is the second in less than 10 months. Fertilizer prices rose by about 10% last June as Israel halted gas supplies to Egypt following the 12-day war it launched against Iran. At the time, however, the government suspended gas supplies to some industries, including fertilizer production, something that has not happened so far in the current crisis.
The increases come ahead of plans by Egypt’s Ministry of Petroleum to raise natural gas prices for energy-intensive factories by an average of $1 per million British thermal units, bringing the minimum price for some industries to $5.50, according to Al Arabiya Business.
Khaled Abou El Makarem, head of the Chemical and Fertilizers Export Council, said fertilizer prices had risen to between 22,000 and 23,000 pounds ($410 to $430) a ton in anticipation of expected gas-price increases following the global rise in energy prices.
On Monday, he said global fertilizer prices had risen by about $130 a ton to between $575 and $650, while Egyptian export prices had risen by about $125 to between $610 and $625 a ton, creating an opportunity for Egyptian producers.
He said exporters would have more room to increase shipments and capitalize on higher global prices, provided local market needs were still met and foreign-currency earnings were maximized.
“This will not be the last increase,” said Mohamed Elkheshen, head of the Fertilizer Distributors Association in Egypt and chairman of Evergrow, citing geopolitical tensions that have pushed up global energy and raw material prices. Gas accounts for about 55% to 60% of fertilizer production costs, he said.
Elkheshen told Al Manassa he expected the government to raise subsidized gas prices for factories by 30%, warning that any cut in gas volumes would hurt production and add pressure to domestic prices.
Egypt produces about 6 million tons of fertilizer a year, while domestic consumption is about 3 million tons, making it one of the world’s major exporters, he said.
Farmers receive seasonal quotas of fertilizer at subsidized prices through agricultural cooperatives. But because subsidized allocations are limited, many turn to the open market to buy additional quantities.
“Continued local price increases in the coming period have become inevitable as a result of global pressure on energy prices and the local repercussions that will follow,” he said.
Elkheshen’s remarks come as Evergrow faces a financing crisis. The company has come under criticism in recent days over debts owed to 35 banks. In a press statement, Evergrow said its total indebtedness exceeded 40 billion pounds ($740 million), but that three-quarters of the amount reflected scheduled interest resulting from changes in interest rates and the dollar exchange rate.
Fertilizer and petrochemical plants need between 700 million and 750 million cubic feet of gas a day to meet plans to increase exports by 12% in 2026, according to a source familiar with export plans at the Export Council for Chemical Industries and Fertilizers in previous remarks to Al Manassa.
