CAIRO: Egypt’s Industrial Development Authority (IDA) approved the construction of a nitrogen fertilizer production line, which will see investments of LE 400 million.
The new production line will be set up in the Egyptian Chemical Industries’ (KIMA) Aswan facility.
In a statement, the Ministry of Trade said the facility is expected to create 1,500 new jobs, in line with Egypt’s plan to build 1,000 new factories in Upper Egypt.
The new line will produce 600,000 tons of urea and 600,000 tons of ammonium nitrate, both nitrogen-fixing fertilizers.
IDA Chairman Amr Assal announced that the fertilizer is specifically intended for use in Upper Egypt in conjunction with the government’s efforts to enhance the region’s development.
Power for the plant will be generated by natural gas, Assal said in a statement. The resulting 60 percent cut in production cost, amounting to LE 700 million, “will go towards financing small and medium factories.
Fertilizer production is categorized as energy-intensive by the government, and thus receives no government subsidy on energy prices as of 2007.
Natural gas, or methane, is a key ingredient in the production of nitrogen fertilizer, created by a reaction between ammonium and other compounds. The low cost of natural gas in Egypt, as well as government subsidies, keeps fertilizer production costs artificially low.
When global fertilizer prices spiked last year, as farmers struggled to increase production in response to the food crisis, the Egyptian fertilizer market benefited. Although a 5 percent drop in demand has lowered fertilizer prices in 2009, inexpensive Egyptian fertilizer remains attractive on the world market.
Subsidies keep domestic fertilizer prices even lower. According to local media, fertilizer subsides account for LE 1.3 billion of the total subsidy budget. Black market sales of fertilizer prompted the government to raise the price last year by 90 percent, bringing the cost to LE 1,500 per ton, still well below the global average of LE 2,100 per ton.
The new plant will join Aswan’s phosphate fertilizer plant, recently opened by Aswan Fertilizers and Chemical Industries Company.
Last year, plans to build a nitrogen-fixing fertilizer factory in Damietta were scrapped after Agrium Egypt met with opposition from residents. Concerned about the potential negative effects on the local environment and tourism, Damietta’s citizens successfully petitioned for the plant to be relocated.
While the synthetic production of urea requires only that ammonia and carbon dioxide combine within a reactor at high temperature and pressure, the creation of ammonium nitrate requires a violent and exothermic reaction between anhydrous ammonia gas and nitric acid. The production of fertilizer is generally less of an environmental concern than its overuse, which can lead to algae blooms and at higher levels can be toxic.
While the new plant appears not to have concerned local residents, it has attracted interest outside Egypt. Al-Masry Al-Youm reported in September that the five supplying bids to equip the factory came from companies in Japan, Germany, China and India. A bidding date has yet to be set.
