The Egyptian government intends to raise the price of natural gas for fertilizer factories by 57%, to reach nine dollars per million thermal units instead of 5.75 dollars. It also intends to raise the price of gas for cement factories by 22%, to reach seven dollars per million thermal units instead of 5.75 dollars, according to sources in the two sectors.
Amid news of the government’s intention to raise gas prices, the shares of cement, iron and fertilizer companies fell on the stock exchange last Monday. The government had raised the price of gas for several industries last October, including fertilizer factories, by 28%, to reach $5.75, after its stability for nearly two years at $4.5.
The former deputy of the Agriculture Committee in the House of Representatives, Raif Tamraz, said that the government’s support for fertilizers provided to farmers consists in subsidizing the prices of gas supplied to fertilizer factories, in return for factories committing to supply 55 percent of their production to the Ministry of Agriculture. Fertilizer companies are allowed to export the remaining production with 10% supply to the local free market, he added. He also pointed out that companies are not committed to the domestic supply ratio and are exporting a larger proportion of production, given the profits from the high global prices of fertilizers after the Russian invasion of Ukraine.
According to a report issued by the research unit of Beltone Bank, fertilizer prices in the global markets have witnessed a significant jump, since the beginning of the war at the end of last February. A ton of urea jumped from $700 to $1,250, making the fertilizer sector in Egypt one of the sectors that benefited the most from the crisis.
On the local level, the matter may be different. During the past weeks, the price of a sack of subsidized fertilizer increased from 165 pounds to 235 pounds, Tamraz explained, noting that if the government raised the price of gas to factories, the prices of subsidized fertilizers would rise.