Omnia says it is built to absorb Hormuz shock

WHAT are the consequences of war in the Middle East for South Africa’s primary industries? Two stand out: first, farmers will likely suffer the twin effects of disrupted supply and inflation more than miners; second, but for the country’s infrastructure, the situation would be a lot worse.Plumb in the crosshairs is Omnia. It supplies fertilisers to agribusiness and explosives to the mining sector by using substances such as ammonia and urea in the manufacture of nitrates. About 30% of all ammonia is shipped through the contested Strait of Hormuz. Sasol also makes about 400,000t of ammonia annually, but the majority of chemicals are imported.That’s why Omnia CEO Seelan Gobalsamy has something of a window view on the crisis. “I think explosives are a smaller part of the mining value chain than fertiliser is in the agri-value chain,” he tells the FM. “So, the risk to food inflation is probably higher than the risk in a mining context.”But in terms of actual storage capacity, the ability to store chemicals is shared over the supply chain on ships, at port and in manufacturing bases. On these grounds, there’s an estimated six to eight weeks of combined storage available, which is not the same as Omnia’s on-site storage. It speaks mightily to infrastructure here. “We haven’t run short of any fertiliser or explosives, and we’ve been able to shore up supply for the coming few months — so even though we do have product stuck in the Middle East, we’ve been able to source alternative product,” he says.“That speaks to our storage and the redundancy of our supply chain, and all of that has worked very well for us.”Inevitably, costs will be passed on to customers. “I think there will be costs that we are forced to pass on; we can’t absorb them,” he says. “Ammonia is more than double what it was a few months ago, so we have to pass on that ammonia cost, and similarly urea, which is another form of nitrogen, has gone up by even more than that.”There will also be an impact on the company. Noncritical capital expenditure will be curbed. “We will still do the growth projects and the projects that enhance our supply chain, but the discretionary projects we will put on ice until the Middle East situation is settled,” he says.Much, though, depends on how quickly trade resumes through the Strait of Hormuz, and whether a lasting peace can be forged between the US and Iran.The damage to some infrastructure in the region is so significant that long-term consequences are inevitable, says Gobalsamy. In the short term, however, South Africa’s agribusiness is considered relatively robust. Indications are that a strong crop for maize, South Africa’s largest staple, is expected for the 2025/2026 season which is harvested between April-July, says RMB Morgan Stanley in a recent report.“But higher diesel and fertiliser prices could now be expected to affect the economics for South Africa’s winter crop, most notably wheat — the country’s second-most important cereal crop — with planting season approaching from mid-April onwards,” the report said.This article first appeared in the Financial Mail, a property of the Financial Mail Group.The post Omnia says it is built to absorb Hormuz shock appeared first on Miningmx.Weiter zum vollständigen Artikel bei Mining.com Weiter zum vollständigen Artikel bei Mining.com