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Covid-19 negatively affects Kima’s development, expansion plans - Daily News Egypt

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Covid-19 negatively affects Kima’s development, expansion plans

Market researchers suggest urea plants could go offline in bid to reduce supply glut

The development of the Egyptian Chemical Industries – Kima’s plant (KIMA 1), worth an initial $150m, has been postponed, according to an official source at Kima. The implementation period will now take two years.

Moreover, the operation of the company’s second factory (KIMA 2) at full capacity has been delayed due to the current conditions created by the coronavirus (COVID-19) pandemic.

The source expects the project will start yielding results at the beginning of fiscal year (FY) 2020/21.

In March, Pharos Research reported that the global urea seemed apparently resistant to the devastating impacts of the pandemic, as prices edged upwards towards roughly $260/tonne.

Since then, however, China has begun exporting more fertilisers, against weak demand on Indian tenders, which has pressured prices to current lows of $200/tonne.

Market research providers suggest plants could go offline soon in a bid to reduce the supply glut. Pharos Research remains conservative, however, expecting prices to average $200/tonne for the remainder of the year.

This would bring the overall average during 2020 to $225/tonne, with an assumed gradual recovery in urea prices to $260/tonne by 2024.

“So far, the nitrogen fertilisers sector has been marked safe from bottom line losses during this time of crisis. This alone creates a relatively positive sentiment surrounding the sector, particularly when compared to other commodity markets that have witnessed more severe downturns,” Pharos Research noted.

It added, “As for KIMA, despite the stock’s trading 2020e EV/EBITDA multiple of 21.6x, we believe the stock has the most catalytic potential, so keep an eye out for major changes in fundamentals.”

Topics: COVID-19 Kima

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