The Perfect Storm has Arrived
Incitec Pivot (ASX: IPL) has just written down the value of its fertiliser plant in Queensland by $106 million due to higher gas prices – the perfect storm in Australia’s LNG market has arrived.
As we’ve forewarned here, here and here, Australians are expected to pay a lot more for natural gas, despite our abundant resources, aggravated by the completion of multiple large export projects which were approved during the resource boom.
Energy-intensive manufacturing in Australia is now directly under threat (despite the benefits of a lower Australian dollar) and the flow-on effects are significant. Incitec Pivot is calling on the Government for assistance, not only for the 200 people directly employed by the plant, but for the thousands of downstream participants like farmers who rely on the fertiliser produced.
Incitec Pivot’s announcement should not be viewed as an isolated incident and must spurn greater collaboration between Government and Industry to fix the considerable inefficiencies in the domestic market.
Ben MacNevin is an Analyst with Montgomery Investment Management. To invest with Montgomery domestically and globally, find out more.
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