Global Investment House - Egypt - Algeria Economic & Strategic Outlook - December 2008-
Over the last couple of years, the Algerian government has been implementing a program dedicated towards increasing utilization of all its energy and natural resources, through improving its downstream energy industries. One of the key sectors targeted by this program is the fertilizers sector.
Since 1980, fertilizers production has increased from 54.6 thousand tons to 133.6 thousand tons in 2005 at a CAGR of 3.64%. The increase in fertilizers production in Algeria came on the back of the abundance of natural gas in the country. The majority of production is being exported, as low production costs give Algerian fertilizers a price advantage.
Total Fertilizers Production in Algeria
Source: FAO Data
On the other hand, fertilizers consumption has decreased from 235.7 thousand tons in 1980 to 107.4 thousand tons in 2005, representing a -3.1% CAGR. This could be attributed to the extremely underdeveloped agricultural landscape of Algeria compared to other countries in the region.
Total Fertilizers Consumption in Algeria
Source: FAO Data
The main entity responsible for the production of fertilizers in Algeria is the National Company for Fertilizers, Asmidal, a subsidiary of the state-owned Sonatrach. Asmidal acts as a partner to almost all private or international companies interested in exploiting Algeria’s undeniable potential in the fertilizers market.
One of the main projects currently underway in the Algerian fertilizers market is Sorfet, a joint venture between Egyptian based Orascom Construction Industries (OCI) and Asmidal, which will establish a mammoth ammonia/fertilizer production facility in the region of Arzew, to come on stream by 2010. Sorfet is designed to produce as much as 1mn tons of ammonia/urea fertilizer, in addition to 700 thousand tons of ammonia. In addition, Omani based Suhail Bahwan Group Holding (SBGH) has also entered into a joint venture with Asmidal to construct a new ammonia/urea plant. The new plant, named Sharkia El Djazairia El Omani lil Asmida (AOA), will cost an estimated $US2.4bn and will produce around 7,000 tons of urea and 4,000 tons of ammonia per day.
The outlook of the fertilizers sector in Algeria appears to be a bright one, as the country’s relatively cheap feedstock, labor and its proximity to Europe give it a competitive advantage over its rivals. Moreover, continuous reforms in business legislation will further enhance Algeria’s ability to attract foreign investments to the downstream industries. However, one of the main obstacles that will face the Algerian government is that the country has a severely underdeveloped infrastructure, which may deter some investors. Moreover, Algeria will most definitely face stiff competition from countries in the MENA region, as several countries within the region are interested in developing their own downstream industries. The Gulf countries in particular, buoyed by high oil revenue, are looking to decrease their dependency on oil exports and are very interested in further enhancing their downstream industries.
