Egypt’s Fertilizer Sector: Implications of Gas Supply Cuts Amid Rising Energy Costs and Potential Recovery in Global Prices
Egypt’s fertilizer sector is facing increasing pressure on profit margins amid rising natural gas costs, one of the industry’s key production inputs alongside the decision to reduce gas supplies allocated to factories by 20%, effective November 1. This puts companies under two main challenges:
1) Rising Natural Gas Costs
The average European natural gas price (TTF) reached approximately $25.49/MMBtu in September 2026, compared to around $11/MMBtu in September 2025, representing a year-on-year increase of approximately 132%, reflecting mounting pressures across global energy markets
On the domestic front, Egyptian nitrogen fertilizer producers face natural gas costs of approximately $8.5/MMBtu, representing a direct burden on production costs and profit margins, particularly given that natural gas is one of the key inputs in ammonia and urea manufacturing. Accordingly, higher domestic gas costs, alongside volatility in global energy markets, further underscore the importance of companies’ ability to control production costs and maintain operating levels
2) Impact of Gas Supply Cuts on Production
Company disclosures indicate different approaches to managing the decision:
Abu Qir Fertilizers (ABUK): Managed the reduction in gas supplies through inventory management and rescheduling maintenance activities, while maintaining ongoing operations.
MOPCO (MFPC): Continues to manage production in line with available gas quantities
KIMA (EGCH): Reported that its urea plant continues to operate normally despite the reduction in gas supplies
It is important to emphasize that a 20% reduction in gas supplies does not necessarily translate into an equivalent decline in production. The actual impact depends on operational efficiency, inventory levels, the duration of the supply cuts, and the availability of alternative operating arrangements
We will continue monitoring the impact of these developments on production and sales volumes, as well as profit margins, as companies begin reporting their Q4 2026 financial results.
We would also highlight that some investors expect global urea prices to increase in the coming period, driven by higher global gas prices and supply constraints, which could help fertilizer producers offset part of the increase in production costs
However, this outlook remains dependent on the continuation of geopolitical tensions and elevated energy prices. Should the war come to an end and natural gas prices return to previous levels, urea prices could decline, potentially limiting companies’ ability to pass higher production costs on to customers. Accordingly, relying on sustained increases in urea prices as a key driver of profitability carries risks that should be carefully considered
Our View on the Companies
Despite the pressures facing nitrogen fertilizer producers, although to varying degrees, we believe MOPCO enjoys a relative competitive advantage through its long-term natural gas supply contracts, which may provide a degree of protection by supporting greater stability in production costs compared to exposure to fluctuations in gas prices. Nevertheless, the company remains exposed to the risk of reduced gas supply volumes and their potential impact on operating rates
Under current conditions, the challenges facing the sector extend beyond higher natural gas costs to include risks of reduced gas supplies and volatility in global urea prices. Therefore, the ability to secure reliable gas supplies, maintain operating rates, and control production costs remains the most critical factor in evaluating companies across the sector.
Walaa Mosalam - Prime Research
WMosalam@egy.primegroup.org