Egypt’s surging electricity demand during the ongoing heatwave, coupled with maintenance work on the gas network, has led to a temporary 20%-30% reduction in gas supply to several fertiliser companies.
This has resulted in production halts at major producers like Sidi Kerir Petrochemicals Company (SIDPEC) and Misr Fertilisers Production Company (MOPCO), according to statements released by the companies to the Egyptian Exchange (EGX).
The Ministry of Petroleum and Mineral Resources has assured that gas supply will gradually resume from Thursday as maintenance work is completed. However, the disruption has already had a significant impact on the EGX, with indices collectively declining at the close of Wednesday’s trading session due to profit-taking from local institutions. Petrochemical stocks were particularly hard hit due to the gas supply cuts.
The shutdown of fertiliser plants, which are major consumers of natural gas and key producers of urea, comes as Egypt grapples with increased electricity demand during the heatwave.
The Egyptian Ministry of Petroleum is working to increase gas production to meet the growing energy needs, aiming to boost production by 8% in the next fiscal year. The country is also planning to launch an international tender to import liquefied natural gas to meet its fuel requirements until October.
The Ministry of Electricity currently requires approximately 135 million cubic metres of gas and 10,000 tons of diesel daily to avoid power outages and reduce electrical loads across Egypt. The current load-shedding system reduces electrical loads for two hours a day, with power cuts alternating between regions.
Mostafa Shafei, Head of Fundamental Analysis at Arabeya Online, stated that fertiliser-producing companies, especially those relying on nitrogen fertilisers, would be negatively affected by the supply halt. He also pointed out that global urea prices would impact the sector.
The blue-chip EGX30 index declined by 1.26%, closing at 26,634.3 points, while the EGX70 index of small and medium-sized companies decreased by 1.87% to 5,794.9 points. The broader EGX100 index fell by 1.79% to 8,422.2 points. However, the Commercial International Bank (CIB) stock, with the largest relative weight, rose by 2.16% to EGP 78.2.
A survey conducted by Daily News Egypt found that the cuts affected the fertiliser and iron industries, but not the ceramics industry. Fertiliser companies, heavily reliant on natural gas, were the most significantly impacted.
