The Russia-Ukraine conflict may open up opportunities for Egypt on the back of declining Russian exports to world countries. Natural gas and fertilisers are on top of such exports.
With the recent pound devaluation, exports of fertilisers may boom, especially as Russia cut its output due to Western sanctions.
Natural gas is a 60 per cent component of the fertiliser industry.
It is used as an ingredient of the manufacturing process, not only an energy resource in producing ammonia and urea.
A number of top importers of fertilisers like Brazil, the United States, China and India may turn to Egypt as a supplier.
Russia is a major global exporter of potash, ammonia and urea.
In 2021, Russia snatched 22 per cent of ammonia exports and 14 per cent of urea exports worldwide, data from global information gateway Statistics showed.
Egypt’s exports of fertilisers fell by 32.6 per cent to $116.9 million in January 2022, down from $173.6 million in the same month a year earlier, data from the state-run Central Agency for Public Mobilisation and Statistics (CAPMAS) showed.
The country’s fertiliser exports jumped by 61 per cent to $2.29 billion in 2021, up from $1.42 billion the previous year, according to CAPMAS data.
Why Egypt?
The North African country has been upgrading the fertilisers sector as part of extensive efforts to bolster sustainable agricultural development as a whole. There are around 20,000 chemical plants, including fertiliser producers, across the country.
Egypt was in the 14th place globally in terms of natural gas production in 2020 with an output of 58.5 billion cubic metres (bcm), the Cabinet Media Centre said in a report in February.
Egypt has maintained its production and export levels of natural gas despite the repercussions of the Covid-19 pandemic over the past two years. In the fiscal year 2020/21, natural gas output reached 66.2 bcm, while consumption stood at 62.9 bcm.
In the fiscal year 2019/20, natural gas production was 63.2 bcm and consumption totalled 59.6 bcm, according to the report. Egypt’s fiscal year begins on July 1. As of September 2018, Egypt has been self-sufficient, bouncing back as an exporter of natural and liquefied gas.
Higher production of natural gas is a boon for the fertiliser sector, which may attract more fresh investments in the coming years.
Fitch Solutions forecast a number of recently completed, ongoing and planned investments in the Egyptian fertiliser sector would increase output over the coming years.
“In particular, investment has been focused in the production of nitrogen fertilisers, already the most-produced category of fertiliser in the country, as opposed to phosphate and potash,” a Fitch Solutions report said in 2021.
Outlook
With the Russia-Ukraine conflict going on and the Western sanctions on Moscow taking their toll on the global fertiliser market, there is an opportunity for growth in Egypt’s exports.
Egypt’s fertiliser exports may top $3 billion in 2022 if the status quo remains.
Prior to the Ukraine war, Fitch Solutions expected a shift in Egypt’s fertiliser export destinations over the long term.
“Multiple European markets are currently among Egypt’s top nitrogen fertiliser export destinations, including France, Spain and Greece. It is unlikely that fertiliser demand from these countries will increase substantially, especially as the EU makes efforts to reduce greenhouse gas emissions from the agricultural sector, including a reduction in fertiliser use as part of the European Green Deal,” Fitch Solutions said in the aforementioned report.
Discussion about this post