Two of Egypt’s largest nitrogen fertilizer manufacturers are asking the government to rethink the prices at which they supply subsidized fertilizers. This request is a direct consequence of the EGP’s shift to a flexible exchange rate regime which — according to sources who spoke to Asharq Business under condition of anonymity — pushed up the cost of gas for producing fertilizer by 44% to EGP 6,500/ton.
So What: The Egyptian government requires these producers to sell 55% of their output at reduced rates to the Ministry of Agriculture to meet the domestic market’s demand before allowing exports.
The Pressure Point: Following the Central Bank of Egypt’s (CBE) decision to shift the EGP to a flexible exchange rate regime, the EGP fell to around 49.45 against the USD, and though it has slightly recovered to about EGP 47.5, companies like EGX-listed Abu Qir Fertilizers and Helwan Fertilizers find themselves in a pinch. They now face a loss of EGP 2,000/ton of subsidized fertilizer, with production costs skyrocketing from EGP 4,500 to over EGP 6,500/ton.
The Bigger Picture: Factoring in operating and transportation costs, the overall production cost for subsidized fertilizer stands at EGP 9,000/ton. This situation suggests significant potential losses for fertilizer firms if the pricing status quo remains.
Now What: Egypt’s farming lands cover 9.6 million feddans, requiring around 4 million tons of nitrogen fertilizer annually. The industry’s push for a pricing review is crucial to balancing affordability for farmers and sustainability for manufacturers amidst ongoing economic adjustments.
