Urea will benefit from the impact of the crown as gas prices fall

Chennai: The coronavirus epidemic could also have a positive side. Urea producers could benefit from the impact of the coronavirus as gas prices fall.

According to estimates, a $ 1/mmbtu reduction in the price of combined gas reduces the cost of urea production by about Rs 1,500 to Rs 1,600/MT, which translates into a lower subsidy for the government and lower capital loans of work for companies. According to the analysis of the research firm ICRA, the impact of the coronavirus scare is expected to be mild despite the fact that the national industry imports a large part of the raw materials for phosphate fertilizers, mainly phosphoric acid and finished fertilizers (mainly DAP - 47% of total imports in fiscal year 2019) of China.

“The province of Hubei is an important center for the production of phosphoric acid and phosphate fertilizers. Although production has declined in the province, the general fertilizer market is still well supplied due to the accumulation of inventories at the end of the producer in China, as international prices remained weak. Therefore, international prices are not expected to be affected by the dynamics of Chinese industry, unless the closure extends to the second half of February. As for the fertilizer industry in India, with the markets that are currently well supplied and the fourth quarter of the financial year is an off-season period for the industry, the impact of China's closure is expected to reduce. In addition, global urea markets have remained well supplied in recent years with new online capabilities in Africa, the Middle East and Africa. With the downward trend in Chinese exports in recent years, the impact of the Chinese urea industry on the world market has been reduced, said K Ravichandran, group leader and senior vice president of ICRA.