Easing of geopolitical tensions in West Asia seems to have rekindled the hopes of fertilizer manufacturers for an uninterrupted supply of raw materials to boost production.
Diversion of import shipments via Cape of Good Hope for over a year following Houthi militant attacks on ships in the Red Sea route had resulted in additional cost and time delay for many industrial sectors in India including fertilizer.
With normalcy restored in West Asia, the public sector FACT is now expecting a continuous availability of phosphoric acid to meet the production requirements for at least the next couple of months, official sources said. This is expected to improve fertilizer production levels that were disrupted in the last 4-5 months.
The company faced a liquidity crisis in the second half of the year as non-availability of phosphoric acid in the international market forced it to curtail operations considerably. In the context of changed global situation, the company is hoping to improve production levels, the sources said.
The profit margins of many fertilizer manufacturing companies had shrunk with a rise in raw material costs as the sector was passing through a difficult period marked by subdued demand and surging cost.
FACT produces Factamfos, Ammonium Sulphate and imports NPKs & Muriate of Potash, which have a high demand in the domestic market.
Supplies to be stable
According to Akshay Agarwal, Managing Director, Acumen Capital Markets, the diminishing geo-political tensions and restoring a normalcy on shipping routes is expected to improve supply stability. The emerging situation would enhance raw material availability, helping manufacturers recover. Leading fertilizer companies such as GNFC, GSFC, Coromandel International, Chambal Fertilizers, Paradeep Phosphates, and FACT are set to benefit. For instance, he said FACT had reported a nearly 90 per cent decline in Q2FY25 profits due to high phosphoric acid prices, highlighting margin pressure. This underscores the industry’s dependence on imported raw materials.
The fertilizer industry, he said, is crucial to the Indian economy, ensuring rural employment, agricultural productivity, and food security. The government supports affordability through subsidies and budgetary measures. However, recent geopolitical disruptions have strained supply chains, particularly affecting phosphoric acid, potash, and ammonia availability. This has pressured production and reduced operating margins, he added.
