Fertilizers: An industry profiting under fire
Despite the disruption wrought by the war with Iran on global energy markets, with trade flows and supply chains thrown into disarray, the fertilizer industry stands out as one of the few sectors to have emerged from the turbulence not merely unscathed, but profitable. Manufacturers of this critical agricultural input have turned conflict into commercial advantage.
Fertilizer producers are emerging from Donald Trump’s confrontation with the Iranian regime with their margins intact or improved. As the head of the Chamber of Chemical Industries told Al Manassa, “No one is losing money, at least for now.”
The losers are farmers, hit by rising input costs, and ordinary citizens, for whom higher fertilizer prices mean one thing only: more inflation.
Why have energy costs failed to dent fertilizer margins?
Natural gas accounts for between 60 and 80% of the cost of producing nitrogenous fertilizers, the main category manufactured in Egyptian plants. The sharp rise in energy prices since the onset of hostilities would ordinarily translate into a substantial increase in production costs. Yet this has not necessarily resulted in losses. On the contrary, producers have managed to generate profits driven by rising global prices, particularly given that Egypt produces between seven and eight million tons of nitrogenous fertilizers annually, of which approximately half is exported.
While the government raised the price of gas supplied to fertilizer factories to $8.50 per million British thermal units, manufacturers raised urea prices by even more, as World Bank data confirms.
Phosphate fertilizers have also recorded notable price increases, reaching $350 per ton compared with around $180 previously, while potassium sulphate has climbed to more than $700 per ton from the $600 to $620 range, according to Mohamed Elkheshen, head of the Egyptian Fertilizer Distributors Association, speaking to Al Manassa.
Domestically, too, fertilizer producers have emerged as winners from the wartime environment. Prices of “free market” fertilizers (those not sold through Ministry of Agriculture channels) have risen by 30%, against a 21% increase in the government-set gas price for those factories.
“Current market dynamics appear to favor producers, with end-product prices rising at a faster pace than costs,” said Salma Taha Hussein, head of research at Naeem Brokerage, speaking to Al-Manassa.
She explained that the contraction in supply during the war has provided additional justification for raising fertilizer prices above the level warranted by energy cost increases alone, with output clearly disrupted by broken supply chains and export restrictions imposed by several producer nations.
Last week, the executive director of the UN’s International Trade Center warned of a decline in global fertilizer supply, noting that around one-third of world urea (nitrogenous fertilizer) production transits the Strait of Hormuz.
Walaa Ahmed, head of research at Prime Securities, told Al Manassa that some fertilizer-producing countries have moved to curtail or temporarily suspend exports to safeguard domestic supply, contributing to a reduction in global availability and pushing prices up faster than production costs.
Wartime profits
These dynamics have prompted many to back fertilizer stocks as a winner, reflected clearly in the performance of shares in several fertilizer companies, which have recorded strong gains during the conflict compared with modest growth in the main market index.
Even after Donald Trump announced a two-week ceasefire with Iran on 8 April, the fertilizer sector showed no signs of losing momentum. Futures prices for urea indicate that prices remain some 70% above pre-war levels.
Elkheshen, who also heads Evergrow, noted that the rise in global fertilizer prices has outpaced the domestic increase, encouraging many companies to redirect production toward exports to capitalize on the latest wave of price appreciation.
He expects fertilizer profitability to continue climbing, given that gas prices remain more than 100% above their pre-war levels. “Any de-escalation will not be reflected immediately in prices, given the persistence of uncertainty,” he said.
Egypt’s fertilizer exports exceeded $9.4 billion last year. Several factors currently favor the enhanced profitability of fertilizer companies, particularly Egyptian producers, which stand to harvest hard-currency export revenues at a time when the dollar is strengthening against the pound under wartime conditions, as Hussein explained.
Medhat Yousef, former deputy chairman of the Egyptian General Petroleum Corporation, pointed to the impact on urea prices of production disruptions in Gulf states, particularly Qatar. Since the beginning of March, QatarEnergy has announced the suspension of several production lines, including urea output. The Gulf region accounts for approximately 40% of global urea exports.
The citizen bears the cost
Egypt’s fertilizer sector has a track record of profiting from crises. It previously recorded record earnings from the depreciation of the pound during the dollar crisis of 2023. But the corollary is that citizens face intense pressure from rising input costs for virtually all the food they consume.
The war has had a direct impact on living costs in Egypt. Inflation returned to strong growth in March, reaching 13.5% year on year, driven by higher fuel prices and a weaker pound.
Fertilizers are expected to add further inflationary pressure in the period ahead. Walaa Ahmed noted that the price trajectory over coming months will remain fundamentally tied to geopolitical developments: continued conflict means sustained supply chain pressure, and therefore continued price rises or elevated volatility.
Even in the event of a resolution, markets will need time to return to normal, Hussein cautioned, consistent with analyses warning that the resumption of previous urea production levels in the Gulf will be difficult owing to damage sustained by infrastructure.
In the months ahead, the financial results of Egyptian fertilizer companies will reveal the full extent to which the sector has capitalized on the war. Equally, inflation figures will lay bare the extent of the damage borne by ordinary Egyptians.