Fertilizers Special 2% Charge For Gas Might Be Reduced

As a part of its efforts to alleviate the impact of the upcoming gas price hike on producers of nitrogen fertilizers, the Ministry of Industrial Policy proposed a reduction in special gas charges from the current 2% to 0.01%. The ministry also said it will not cancel VAT for those enterprises, because of the discriminative nature of such a measure. Vladimir Nesterenko: The potential effect will be small compared to the impact of the gas price increase and relative to the size of the companies’ COGS. Annual savings might came to USD 5.4 mln for Stirol (STIR: SELL), about USD 2.3 mln for Dniproazot (DNAZ: SELL), and about USD 3.5 mln for Azot Cherkasy (AZOT: Susp). If not combined with other support, such as gas price discounts, this measure alone won’t cause us to revise our generally bearish view on the sector.