Fertiliser Stocks Surge on New Natural Gas Regulation and Crude Oil Correction
Fertiliser company shares, including FACT and Deepak Fertilisers, surged up to 18% following the government's Natural Gas Regulation Order, 2026. The order ensures 70% natural gas supply to fertiliser plants, a critical raw material for ammonia. Additionally, a crude oil price correction provided some relief. However, experts warn of continued volatility due to crude rates and the West Asia conflict stressing supply chains, advising caution despite the rally, especially for fresh investments.
Shares of major fertiliser companies like FACT, Rashtriya Chemicals, Chambal Fertilisers, GNFC, and Deepak Fertilisers witnessed significant surges, jumping up to 18.31% in Tuesday's trading. This rally was primarily driven by the government's newly issued Natural Gas Regulation Order, 2026. The order mandates maintaining natural gas supplies to fertiliser plants at 70% of their six-month average consumption, with the strict condition that the gas must be used exclusively for fertiliser production. Natural gas is a vital input, serving as a key feedstock for ammonia, which is essential for manufacturing urea.Adding to the positive sentiment, Kranthi Bathini of WealthMills Securities noted that the sector also experienced a relief rally following a correction in crude oil prices from their recent peak of $120 per barrel. However, Bathini cautioned that crude volatility would continue to pressure these entities in the medium-to-short term, advising existing investors to hold but not to make fresh accumulations due to potential heightened volatility.Further complicating the outlook, Ravi Singh of Mastertrust highlighted the adverse impact of the West Asia conflict on India's fertiliser sector, particularly with the Kharif season approaching and supply chains already stressed. India relies on imports for nearly 30% of its fertiliser needs, with the Middle East being a major supplier. Disrupted supply routes and soaring LNG prices are increasing the cost and difficulty of procuring ammonia for companies like Chambal and RCF. Agrochemicals, tied to crude oil derivatives, are also vulnerable to price fluctuations. In contrast, speciality chemicals firms such as Navin Fluorine and Atul, with limited Middle East exposure, might benefit from tightening global supply and improved pricing power.
