Fertiliser Shares Jump Up To 18% on New Natural Gas Regulation and Crude Price Correction
Shares of major fertiliser companies, including FACT, RCF, and Deepak Fertilisers, soared up to 18% following the government's Natural Gas Regulation Order, 2026. This order ensures 70% natural gas supply to fertiliser plants, crucial for production. A relief rally from corrected crude oil prices also contributed. However, analysts warn of potential short-term volatility due to ongoing crude price fluctuations and the West Asia conflict, which could disrupt supply chains and raise raw material costs for the sector.
Shares of key fertiliser companies, including Fertilisers and Chemicals Travancore (FACT), Rashtriya Chemicals and Fertilisers (RCF), Chambal Fertilisers, and Deepak Fertilisers, surged by as much as 18.31 percent in Tuesday's trading. The primary catalyst was the government's new Natural Gas Regulation Order, 2026, which guarantees natural gas supplies to fertiliser plants will be maintained at 70 percent of their six-month average consumption, exclusively for fertiliser production. Natural gas is a critical feedstock for ammonia, a key raw material in manufacturing urea, making this directive significant for the industry.An additional factor contributing to the rally was a relief in crude oil prices, which corrected from a recent peak of $120 per barrel, positively impacting fertiliser and select chemical sectors. Despite the gains, market strategists advise caution, citing that volatility in crude rates could exert medium- to short-term pressure on these entities. Heightened volatility is anticipated, and while existing investors might maintain positions, fresh accumulation is not recommended at current levels.Furthermore, the West Asia conflict poses significant challenges, particularly as India imports nearly 30 percent of its fertiliser needs, with the Middle East being a major supplier. Disrupted supply routes and surging LNG prices are increasing the cost and difficulty of procuring ammonia for companies like Chambal Fertilisers and RCF. Agrochemicals are similarly affected, as their cost structures are heavily tied to crude oil derivatives, impacting profit margins. In contrast, speciality chemicals companies with limited Middle East exposure, such as Navin Fluorine, could potentially benefit from improved pricing power amid tightening global supplies.
