The current heatwave in Egypt has pushed the government to suspend natural gas supplies to fertilizer factories to provide it to power plants to address the power outage crisis lasting up to four hours daily in some regions. 

Abu Qir Fertilizers, one of the largest fertilizers and petrochemicals producers in Egypt, was the first company to announce in a disclosure sent to the Egyptian Stock Exchange it had stopped production to prevent any damage to its factories amid the ongoing heatwave, which exceeds the expected average temperatures for this time of the year.

Misr Fertilizers Production Company (MOPCO), Egyptian Chemical Industries Company (KIMA), and Sidi Kerir Petrochemicals (SIDPEC) also halted their operations for the same reason.

However, SIDPEC announced resuming operations in its factories with the return of natural gas supplies, according to a statement by the company citing that the crisis started to be addressed.

Ahram Online could not reach officials at Abu Qir Fertilizers and Helwan Fertilizers.

However, a source, who preferred to remain anonymous, told AO that the Ministry of Petroleum and Mineral Resources has instructed the companies not to give any statements to the media regarding the crisis.

Abu Qir takes action
 

In a bid to tackle this unprecedented crisis, Abu Qir Fertilizers said in a disclosure sent on Thursday to the Egyptian Stock Exchange that its board of directors has approved the initiation of procedures for a project that partially replaces natural gas with hydrogen.

Additionally, the company will install solar power stations with a total capacity of 2.5 MWp to reduce electricity consumption from the grid or internal power generators.

Some companies reported that the market started to be influenced by the fertilizer crisis at the start of June, with prices soaring by about 54 percent to EGP 20,000 per ton in the open market compared to EGP 13,000 in May.

The crisis only affects nitrogen fertilizers
 

There are four types of fertilizers: phosphate, potash, mixed NPK, and nitrogen fertilizers, with the latter's production having halted, sources told AO.

They explained that the crisis in nitrogen fertilizers originates from their reliance on gas as a raw material, unlike other types that use gas only as an energy source.

Fertilizer factories supply 55 percent of their production to the Ministry of Agriculture at approximately EGP 5,000 per ton, while selling the remaining 45 percent in the open market or exporting it.

Protecting market from trader manipulation
 

In press statements, government sources have called for increasing market monitoring to counter any manipulations in fertilizer prices until natural gas supplies are restored to factories.

The stockpile of urea fertilizer is estimated at 600,000 tons.

Egypt annually produces seven million tons of urea and ammonium nitrate fertilizer, equivalent to 22 million metric tons of nitrogen with a concentration of 15.5 percent, translating to a daily production of 20,000 tons, which has ceased.

Expectations indicate that prices may continue to rise if the factories remain closed.

The suspension of fertilizer factories seems to be a major crisis in front of the government now.

AO sought to understand whether the halted factories could compensate the market for the suspension period to restore the local market's balance and increase export quantities to maintain the foreign currency revenue that the Egyptian economy needs.

Government intervention
 

Egypt announced the allocation of $1.18 billion to purchase the required quantities of petroleum products, including mazut and natural gas, according to Prime Minister Mostafa Madbouly.

Madbouly also announced that power outages would cease entirely by the third week of July, and commercial shops would close at 10 pm starting from July.

Fertilizer exports
 

Egypt's fertilizer exports reached $546.24 million during the first quarter of 2024, according to the foreign trade report issued by the Central Agency for Public Mobilization and Statistics (CAPMAS).

Before the factories' closure, the Head of the Chemicals and Fertilizers Export Council Khaled Abul-Makarem warned that exporters might lose their markets due to the lack of gas for fertilizer and petrochemical factories, causing irregularities in production and limiting their ability to meet export contracts, according to the council's Facebook page.

Fertilizer exports grew in 2023 by 250 percent compared to figures from 2020, reaching $7 million, according to data from the Chamber of Chemical Industries.

According to data from the Ministry of Trade and Industry, chemical and fertilizer industry exports have reached $1.5 billion in the first quarter of 2024.

Meanwhile, the council reported that the sector's exports exceeded $2 billion in the first four months of 2024.

Profits rise and decline 

Abu Qir Fertilizers' net profit for the 1Q of 2024 was about EGP 8.1 billion, a 44.6 percent increase from the same period in 2023, which recorded EGP 5.6 billion.

However, profits for the nine months of the fiscal year 2023/2024 fell to EGP 12.1 billion, a 3.16 percent decrease compared to the same period in the fiscal year 2022/2023, which achieved EGP 12.5 billion, according to the company's financial statements seen by AO.

MOPCO's profits jumped by about 95 percent in the 1Q of 2024, recording EGP 7.6 billion compared to EGP 3.9 billion for the same period in 2023.

SIDPEC also saw a profit increase of about 7.7 percent, achieving EGP 5.6 billion in 2024, compared to the same period in 2023.

Meanwhile, KIMA's profits declined by about 91 percent in 1Q of 2024, recording EGP 102.3 million, compared to EGP 1.1 billion for the same period in 2023.

Fresh produce exports unaffected
 

Speaking to AO, the Head of the Export Council for Agricultural Crops Abdel-Hamid Demerdash ruled out any impact of the fertilizer factories' shutdowns on the sector's exports, provided it does not exceed one month, since the export season ends in August.

The new export season starts at the end of September, making the current suspension non-impactful on this season's gradually ending export activities.

However, if the suspension lasts for two or three months, it could negatively affect productivity by no more than 10 percent, reflecting on agricultural exports by 8-10 percent based on the types of vegetables and fruits.

Fresh vegetable and fruit exports are particularly sensitive to climatic changes and shipping, which may negatively affect this year's total exports. It could increase by 10 percent or maintain the 2023 export value at $3.5 billion.

Obour market
 

Obour market is one of Egypt’s biggest wholesale markets for vegetables, fruits, and fish.

A potential price increase for next season's vegetables and fruits, planted in July and August, henges on the duration of the fertilizer production halt, Obour Market Official Spokesperson Hatim El-Naguib told AO.

However, the price increase percentage is hard to determine based on supply and demand, how farmers manage crops, power outages affecting water pumps, and climatic changes that significantly impact crop cultivation, added El-Naguib.