The easing of geopolitical tensions in West Asia has given hope to fertilizer manufacturers for a steady supply of raw materials to boost production. For over a year, the diversion of import shipments via the Cape of Good Hope due to Houthi militant attacks had caused additional costs and delays for various industries in India, including the fertilizer sector.
With normalcy now restored in West Asia, the public sector FACT is anticipating a continuous availability of phosphoric acid to meet production requirements for the next couple of months. This is expected to improve fertilizer production levels that were disrupted in the past few months.
The company had faced a liquidity crisis in the second half of the year as the non-availability of phosphoric acid in the international market forced it to significantly reduce operations. With the changed global situation, the company is optimistic about increasing production levels.
Many fertilizer manufacturers had experienced shrinking profit margins due to rising raw material costs in a period marked by subdued demand and escalating costs. FACT produces Factamfos, Ammonium Sulphate, and imports NPKs & Muriate of Potash, which are in high demand in the domestic market.
According to Akshay Agarwal, Managing Director of Acumen Capital Markets, the diminishing geopolitical tensions and the restoration of normal shipping routes are expected to enhance supply stability. This improvement in the raw material availability is likely to help manufacturers recover. Leading fertilizer companies such as GNFC, GSFC, Coromandel International, Chambal Fertilizers, Paradeep Phosphates, and FACT are expected to benefit from this development.
The fertilizer industry plays a critical role in the Indian economy, ensuring rural employment, agricultural productivity, and food security. Recent geopolitical disruptions had strained supply chains, particularly affecting the availability of phosphoric acid, potash, and ammonia, thereby impacting production and reducing operating margins.
As the industry relies heavily on imported raw materials, the improved supply stability is a positive development for fertilizer manufacturers in India.
