Fertiliser and Chemical Shares Soar Up to 18% on New Gas Regulation and Falling Crude Prices
Shares of fertiliser and chemical companies like FACT, RCF, and Deepak Fertilisers surged up to 18% following the government's Natural Gas Regulation Order, 2026, which assures 70% gas supply for fertiliser production. A correction in crude oil prices also provided a relief rally. However, analysts warn of potential volatility due to the West Asia conflict impacting supply chains and rising LNG costs, negatively affecting some fertiliser and agrochemical firms, while specialty chemicals with limited Middle East exposure might benefit.
Shares of major fertiliser and chemical companies, including Fertilisers and Chemicals Travancore (FACT), Rashtriya Chemicals and Fertilisers (RCF), Chambal Fertilisers, and Deepak Fertilisers, experienced significant surges of up to 18.31% in Tuesday's trading. This rally was primarily driven by two factors.Firstly, the government issued the Natural Gas Regulation Order, 2026, mandating that natural gas supplies to fertiliser plants be maintained at 70% of their six-month average consumption, exclusively for fertiliser production. Natural gas is a critical feedstock for ammonia, essential in urea manufacturing, providing much-needed certainty to the sector.Secondly, a relief rally was observed in fertiliser and select chemical pockets following a correction in crude oil prices from a recent peak of $120 per barrel. Despite this, experts like Kranthi Bathini of WealthMills Securities caution that crude price volatility could still exert medium-to-short-term pressure, advising against fresh accumulation.Furthermore, the sector faces headwinds from geopolitical tensions. Ravi Singh of Mastertrust highlighted that the West Asia conflict poses a significant challenge, especially with the Kharif season approaching. India imports nearly 30% of its fertiliser needs, with the Middle East being a key supplier. Disrupted supply routes and soaring LNG prices are increasing the cost and difficulty of procuring ammonia for companies like Chambal Fertilisers and RCF. Agrochemicals, whose cost structures are tied to crude oil derivatives, also face margin pressure. In contrast, specialty chemical companies such as Navin Fluorine, Gujarat Fluorochemicals, and Atul, with limited Middle East exposure, are considered relatively stable and might even benefit from improved pricing power amidst global supply tightening.
