CAIRO: The Egyptian fertilizer industry, among this country’s least glamorous but most important, is about to become a bit more diverse.
Prime Minister Ahmed Nazif approved a batch of licenses this week, allowing 10 companies to produce diammonium phosphate (DAP) fertilizer. Total investments related to the approvals are expected to amount to LE 10 billion.
“It’s a very good decision for the industry as a whole in Egypt, said Mostafa El-Gabaly, managing director of Aswan Fertilizers and Chemical Industries Company, one of the newly-approved companies.
Phosphate fertilizer is made with ammonia, which requires natural gas, and phosphate rock. Because these materials are not renewable, the state should use them to support local industries rather than export them, El-Gabaly said.
“It’s much better for the country to use [raw materials] in growth in manufacturing, he said. “Exporting raw material creates no added value for the country.
Diammonium phosphate fertilizers are not currently made in the Egyptian market, said Muhammad El-Ebrashi, an analyst at investment bank CI Capital Holding. “It’s a new product, he said. “Right now there is zero capacity for it.
Companies are attracted to making phosphate fertilizers in Egypt because the materials used to make it are cheap here, often costing less than half of international prices, El-Ebrashi said.
Phosphate rocks, for example, are sold at LE 250 to 550 per ton to fertilizer companies locally, compared with $150 to $200 on the international market.
While El-Gabaly said his company does not use natural gas to make phosphate fertilizers, the availability of phosphate rocks in Egypt saves him on shipping costs. “We only use phosphate rock, which is not very cheap but at least it’s available in Egypt, he said.
A full list of companies approved by the prime minister’s decision has not been released, but it likely includes a branch of Orascom Construction Industries as well as the Egyptian Financial Industrial Company, according to a note released to investors by CI Capital.
Along with Abu Qir Fertilizers, the Egyptian Financial Industrial Company holds a stake in the Egyphos plant, which specializes in diammonium phosphate fertilizers.
Some of the approved companies already have ammonia-producing lines and other facilities in place and should be able to start producing the new fertilizer relatively soon, while others will not be able to begin until next year, El-Ebrashi said.
El-Gabaly said that his company would begin producing the phosphate fertilizer in the first half of 2010. When complete, a new factory in Aswan will manufacture 300,000 tons of phosphate fertilizer per year, he said.
“We’re building a whole new facility in Aswan, said El-Gabaly. “The investment for the first phase will be around LE 150 million.
Along with most commodities, fertilizer prices tumbled in the fourth quarter of 2008. Export-heavy Egyptian companies, such as Orascom Construction Industries, were among the hardest hit.
