Thursday, Nov 27, 2008

Gulf News

Dubai: Fertiliser production is set to expand dramatically in the Middle East and North Africa (MENA) region with investments of $20 billion (Dh73.56 billion) to be pumped into the sector already enjoying a 149 per cent surge in profits year-to-date for 2008, according to a report from Kuwaiti investment bank Global Investment house.

The expansion going forward would see the establishment of larger plants to produce 60 million tonnes of fertiliser by 2010 and close to 70 million tonnes by 2012, more than doubling production.

Growth in the sector, likely to show a year-on-year increase of more than 10 per cent in 2008, is currently constrained by the inability of existing plants to churn out vast amounts of urea, ammonia, mela-mine and sulphuric acid, which are key components for the production of chemical fertilisers.

Driven by the ample availability of gas in the region, an abundance of raw materials such as potash and phosphate and lofty demand for fertiliser from the South and East Asian countries, the sector has grown exponentially in the MENA region, compared to the rest of the world.

"We remain optimistic on the outlook of the MENA fertiliser sector on the back of sound fundamentals and better cost control measures. The region posted a capacity utilisation rate of over 100 per cent in 2007, which was mainly due to a huge increase in demand for fertilisers in South and East Asia.

"The focus on innovative farming techniques and the drive to increase agricultural yields would continue to bode well for the fertiliser sector in MENA," the report said.

According to the report, fertiliser manufacturers have reported high profit margins. For example, the Saudi Arabian Fertilizer CompanySaudi Arabian Fertilizer Company reported net profit of $998 million during the first nine months of this year, compared to $391 million in the same period last year, an increase of 155 per cent.

The Jordan Phosphate Mines CompanyJordan Phosphate Mines Company reported an increase of 550 per cent in its net income to $287 million for the first three quarters of this year from $44.2 million in the same period of last year.

The report added that international fertiliser prices had surged in the last two years due to the high cost of feedstock in North America, Europe and East Asia.

"However, in the MENA region, the feedstock gas is available at highly subsidised rates and does not depend on the prices of gas in the international market. This is mainly due to ample production and supply of gas in the MENA region and the agriculture-based economy of the South Asia region," it said.

Howarth Mak analyst Dr Khalid Maniar said governments in the Middle East were providing attractive incentives to ensure the sustained growth of the fertiliser sector.

© Gulf News 2008. All rights reserved.

 

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