How does the increase in the price of gas affect the profitability of fertilizer factories in Egypt?

Al-Ahly Pharos Securities petrochemical analyst Marina McCain said the price of supplying natural gas to fertilizer companies in Egypt will rise with the application of the new $ 5.75 to $ 7 price equation. , 28.

McCain added in an interview with “Al Arabiya” that the price increase will have a short-term effect putting pressure on companies’ profit margins.

and issued Mostafa Madbouly, Prime Minister Al-Masry has issued a decision that includes a new mechanism to calculate the price of natural gas supply to nitrogen fertilizer factories.

The decision indicated that, in all cases, the minimum selling price of natural gas for nitrogen fertilizer plants should not be less than $ 4.5 per million British thermal units.

The selling price of natural gas for non-nitrogen fertilizers is set at $ 5.75 per million British thermal units. It does not apply to consumers who pay according to the price formulas included in their natural gas supply contracts and continue to be billed according to the formulas of their contracts.

Marina McCain said that every dollar of gas price increase increases the cost of fertilizer companies by £ 900 million, predicting the negative impact will continue in the short term.

In the long run, Marina believes fertilizer prices will decline globally, ranging from $ 300 to $ 500 per ton of urea over the next 5 years.

And he continued: “The advantage of the new price equation links the price of the main entry to the product with the final price, and therefore will have a positive effect on the level of profitability while bearing some costs”.

He pointed out that the government keeps fertilizer prices in the local market at $ 225, compared to $ 850, the price traded in the global market.

The government was expected to revoke part of the subsidies granted to the fertilizer sector to narrow the gap between local and international prices.

Marina said that reducing the amount of government support would be in the interest of the companies because they sell 55% of their production on the local market at prices set by the government.

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