How Israel-Hamas War is Fueling Fertilizer Stocks in India

(CTN News) – As the 15th day of the Israel-Hamas conflict begins, tensions in the Middle East remain high, especially in the wake of the bombing of a hospital in Gaza.

While world leaders work to broker a peace agreement between Israel and Hamas, savvy traders are already profiting from the conflict. Some fertiliser supplies have increased by as much as 40 percent in the previous two weeks due to the spread of the Israel-Palestine conflict.

Following the outbreak of the Israel War, shares of Gujarat State Fertilisers & Chemicls Ltd rose from their pre-war price of roughly 167.50 to 203 each, giving investors a return of almost 20%.

The share price of Fertilisers And Chemicals Travancore (FACT) rose from around 510 to 710 during the Israle-Palestine conflict, giving investors a return of around 40%.

The price per share of Gujarat Narmada Valley Fertilisers and Chemicals (GNFC) has increased from the low $650s to the high $655s. Similarly, Madras Fertilisers saw its share price increase from 73.45 to 82.50 a share throughout the same period.

Experts in the stock market say that the commencement of hostilities between Israel and Hamas has heightened concerns about the availability of fertiliser around the world.

Ashdod, Israel is seen as a major hub for potash exports; nonetheless, the port’s smooth operations have been threatened by shipping limitations and the threat of war.

Experts on the stock market went on to say that investors are buying fertiliser stocks because they have learned valuable lessons from the rise of these businesses during the conflict between Russia and Ukraine.

Cue from the Russia-Ukraine war

The outbreak of the Israel-Hamas war has raised concerns over global fertilizer supply, particularly because of the potential disruption to potash exports from the region, according to Sonam Srivastava, founder and fund manager at Wright Research, who recalled the fertilizer stock rise during the Russia-Ukraine war.

Ashdod, an important Israeli port for the export of potash, is in “emergency mode” due to the fighting. Therefore, limits on shipping and “war risk” levies have been implemented, which may disrupt the free movement of commodities.

ICL Group, one of the largest fertiliser firms in the world and a major employer in Ashdod, has stated that “business as usual” has been maintained despite the crisis.

Taking a page from the Russia-Ukraine conflict, “When the Russia-Ukraine war broke out, we saw a similar spike in fertiliser stocks,” said Sreeram Ramdas, Vice President of Green Portfolio — PMS.

Concerns about a lack of supplies caused this price increase. Concerns over Potash supplies are also on the rise again, with Israel being a major supplier of the mineral.

We think this is an exaggerated response to a temporary problem that will have little lasting effect. The total value of Israel’s exports of potash and nitrogenous fertilisers amounts to just $330 million and $8 million, respectively.

However, Sonam Srivastave insisted that there would be no dramatic increase in prices as those experienced after the Russia-Ukraine conflict.

Omkar Kamtekar, Research Analyst at Bonanza Portfolio, emphasised the significance of the Port of Ashdod in Israel, which is just to the north of Gaza, in the fertiliser supply chain.

About 3 percent of the world’s potash supply passes through this port, therefore, the ongoing conflict between Israel and Hamas has disrupted shipping. Worryingly, this disruption would be amplified if Iran became involved in the battle.

Since nitrogen and natural gas are necessary ingredients in making nitrogen-based fertilisers, Iran has become a major supplier of both.

Management at several fertiliser firms became wary at the end of Q4FY23 and throughout Q1FY24 due to the surge in the availability of cheap generic Chinese agrochemicals.

But in Q2FY24, we saw evidence of this dumping receding, which pushed prices higher and improved fertilisers businesses’ realisations.

This improved the short-term outlook, as reflected in the stock price, a bonanza Portfolio specialist said, adding, “This rally is sustainable barring any adverse geo-political event.”