The Clap:
A number of fertilizer producers including Abu Qir Fertilizers, Egyptian Chemical Industries ceased operations on Wednesday following a government decision to cut gas supplies to the energy-intensive industry.
Refresher:
Egypt’s Ministry of Petroleum and Mineral Resources reduced natural gas supplies to fertilizer manufacturing companies by 20-30%, officials familiar with the state strategy told Al Arabiya Business. Nitrogen, the primary component of fertilizer enabling high agricultural yields, must be produced using natural gas.
Who else is affected?
Sidpec and Kima claimed they are stopping output until the pressure levels settle, while Mopco, Abu Qir, AlexFert (a subsidiary of Egypt Kuwait Holding), and EgyFert said Wednesday they are stopping production for twenty-four hours. Similarly, Sidi Kerir Petrochemicals halted operations.
The impact:
News of the factory closures led the affected fertilizer firms to lose some market capitalization on market close Thursday. The worst performers on the EGX30 were Abu Qir (seeing a 4.9% fall in share value), Sidpec (4.8%), and Egypt Kuwait Holding (3.7%).
Who has not taken a hit?
Ferchem Misr for Fertilizers and Chemicals, Kafr El Zayat International Pesticides and Chemicals Co, as well as · International Company For Fertilizers & Chemicals all said the gas cuts have not affected their day-to-day operations as their supply remains steady.
Remember:
In response to a decline in gas supply brought on by the conflict in Gaza, the government last reduced gas supplies to energy-intensive industries by up to 30% in November.
This comes as cabinet works to slash energy spending:
Axing spending on gas comes as the country wrestles with its domestic energy supply after becoming a net importer of LNG in recent months following a fall in domestic gas production.
How to solve the problem?
A government insider informed Asharq Business that the cabinet plans to issue an international tender in the next few days to import about 15 shipments of liquefied natural gas (LNG) through October.
Work on resolving the problem is underway:
On Thursday, the Oil and Electricity Ministries were expected to gradually expand the LNG to fertilizer firms. On Thursday, Abu Qir said it began to gradually resume operations after stabilization of gas pressure.
