VINACHEM

The ongoing political turbulence in Egypt could affect import of fertiliser inputs for “some time”, says a note put up by the Ministry of Chemicals and Fertilisers.

“Generally, annual import from Egypt is about 9 lakh metric tons. It is expected that our domestic fertilizer industry would source these inputs from other alternative sources to minimize impact of the situation,” reads the note by Minister of State for Chemicals and Fertilizers Srikant Kumar Jena.

Analysts say this lead to shares of fertilizer companies underperforming in the near to medium term. Some of the manufacturers of single super phosphate (SSP) and phosphatic fertilisers import rock phosphate from Egypt. Small quantity of urea, sulphur and ammonia is also imported from Egypt. Further, Suez Canal touching Egypt is one of the major routes for shipping of raw materials for the fertiliser industry in India.

“The disruption in supply side will lead to increase in prices of the raw materials,” said Sageraj Bariya, a research analyst from Angel Broking.

“However, companies cannot pass on the higher price to the farmers arbitrarily. They may try to import raw materials from the countries like China, US, other than Middle East countries but reasonable pricing could be an issue there,” Bariya says.

Fertilizer companies mostly have long term agreements with Middle East based countries like Egypt, Libya, Morroco for the supply of raw material. Those agreements may have to be scrapped, some say.

Some of the major listed fertilizer companies include Coromandel International (earlier Coromandel Fertilizer) (Rs 275, up 0.50%), Tata Chemical (Rs 329, down 0.50%), Zuary Industries (Rs 620, little changed) and Chambal Fertilizer (Rs 70, down 1%). Most of the stocks have fallen 3% on an average in the last one month. However, Coromandel International (with much higher market capitalization) has risen 19% during the same period.

“We need to see whether the government compensates the farmers for higher fertilizer price. It actually depends a lot on such government decision,” says Gaurav Dua, head – equity research, Sharekhan brokerage.