Government To Support Fertilizer Producers, But Not With Cheap Gas

Yesterday Ukrainian Fuel and Energy Minister, Yuri Boiko, announced that the government is developing a number of measures aimed at supporting the profitability of nitrogen fertilizer producers. However, Boiko noted that the plants should not count on lower gas prices. Vladimir Nesterenko: Although the price of gas for fertilizer producers in 2007 remains uncertain, Boiko’s statement conforms to our earlier forecast that the state won’t subsidize the plants. We also assumed that one way the government could lower the burden of gas cost would be by cutting into gas trader’s margins, which accounts for about $10/tcm of the gas price. It is unclear how the government intends to support the producers, but whatever the measures are we do not think those will be sufficient to off-set gas cost inflation materially.