Egypt's gas shortfall prices its urea $75 above the Gulf

Noise and signal

The headline is relief. CommodityScope data show granular urea FOB Middle East down $5 to $435 a tonne on 10 November. Iranian urea was at $353.5 in the week of 5 November, and Chinese prilled urea at $341.5 on 10 November. Supply from the Gulf and Asia is pulling prices down.

The signal sits in the Mediterranean line of the same table. Granular urea FOB Egypt closed at $510 on 10 November and FOB Algeria at $536. The premium over the Middle East is $75 for Egypt and $101 for Algeria. Nigerian urea, at $465, sits between the two extremes.

EnterpriseAM reported on 4 November that Egyptian urea sold at about $535 in November contracts. In September the price was around $457, a rise of about 17% in two months.

The constraint is the molecule, not the route

According to EnterpriseAM, gas supplied to Kima was cut by 20% from midday on 1 November. The New Arab reported on 8 November that a second round took the cut to 33%, and Misr Fertilizers Production Company confirmed the notice. Abu Qir and MOPCO said they would adjust output to the gas available.

The source of the cut is the LNG bill. The New Arab says $5.8 billion of the roughly $10.1 billion LNG budget for fiscal 2026/27 had been spent by 6 October. That means 57% of the budget was gone in the first 14 weeks of the fiscal year, before winter demand had even begun.

The gas itself has also become dearer. EnterpriseAM says the floor gas price for fertiliser producers rose to $8.5 per mmBtu in April. Under a mechanism linked to global prices, some producers' actual cost exceeded $9 by the end of April. Egypt's constraint is no longer the price of gas but the number of cargoes its foreign-currency budget can carry.

The insurance constraint: the Gulf pays a premium, but a cheaper one

Insurance Business reported on 9 November that the additional war premium for Gulf tankers has eased to 7–9% of hull value, with some cover written at 5%. In mid-October brokers were quoting 6–10%; the pre-war rate was about 0.25%. The same report counts more than 110 claims in the region and estimated payouts of about $2.5 billion.

Talay's reading is this: if Gulf cargoes stay $75 cheaper despite paying the war premium, Egypt's premium comes from gas, not insurance. Egyptian cargoes do not pass through Hormuz, so they are not exposed to that premium at all. A war premium falling into the 5–9% range makes Gulf urea more competitive and widens Egypt's gap.

The falsifier for this thesis is clear. If the Egypt–Middle East gap falls below $25 while Egypt's 33% cut remains in place, the premium is coming from demand. The gap would also close if the Gulf war premium rose back above 10%; in that case the route would again be the binding constraint.

Who gains and who pays

EnterpriseAM puts Egypt's annual urea capacity at about 6.5 million tonnes and domestic consumption at 2.9 million tonnes. The remaining export share of about 3.6 million tonnes is the first casualty of the cut. Egypt shipped 609,000 tonnes of urea to India between April and June; that volume will shrink with the cut.

The same report says Egypt's fertiliser exports were worth $2.53 billion in the first nine months of 2026. CI Capital wrote that the cuts will hit Abu Qir, MOPCO and Alexfert in the fourth quarter of 2026, and probably in 2027 too. An industry source argues that higher prices will offset lost volume, leaving profits balanced between the two effects.

On the buyer side, price sensitivity is acute. EnterpriseAM says India sought 1.7 million tonnes in its October tender but took only about 410,000 tonnes, with offers falling as low as $352 CFR. At $510, Egyptian urea is priced out of reach for this buyer by more than $150.

Probabilities and the Türkiye link

The desk's base case, at 55%, is that the cut lasts through winter and the Egypt–Middle East gap stays in a $50–100 band. At 30%, the government returns allocations to secure foreign-currency inflows, as one official has suggested, and the gap falls below $25. At 15%, a fresh strike in the Gulf pushes the war premium above 10% and the gap closes on its own.

For Türkiye the channel cuts both ways. On 10 November Egyptian and Algerian urea, close to the Mediterranean, were priced above granular urea FOB Black Sea at $475. For Turkish importers, Black Sea and Gulf sources are $35–101 cheaper in the near term; the risk is that these sources carry two different war premiums.