DAP price in Pakistan increased by Rs300

The DAP price in Pakistan have increased by Rs 300 per bag due to high demand globally and cut in supply from China.

Earlier, Fauji Fertilizer Bin Qasim Limited (FFBL) had increased price of DAP in Pakistan by Rs550 per bag. The company has increased its prices due to increased demand globally and the reduction in supply from China.

Now, DAP prices are again up due to increased demand globally.

After the increase in price, FFBL primary DAP margins in Pakistan had increased to a record high of USD230/ton, which was last seen in 2015 as phosphoric acid remained stable at USD689/ton.

It is worth mentioning that FFBL also has a joint venture investment in Pakistan Maroc Phosphore which provides a competitive advantage over regional players. Private importers expect prices to further increase by Rs200-300 per bag as domestic DAP inventory stands at less than 50,000 tons at the end of December 2020.

Engro Fertilisers has also already hiked price of DAP price in Pakistan by Rs400 to Rs4,350 per bag effective from January 7, 2021, following an increase in the commodity’s global price.

International prices of DAP are increasing due to the short availability of the product as production in China has declined due to Covid-19 triggered lockdowns. One of Pakistan’s largest DAP trader Engro Fertilizer Limited has recently imported 33,000 tons of DAP from Saudi Arabia.

Pakistan normally imports the majority of its DAP shortfall requirement from China but this time companies are importing products at higher from Gulf suppliers due to the short availability of products internationally.

Shahroz analyst at Insight Securities said had informed earlier that FFBL in Pakistan would be the beneficiary of the increase in price of DAP.

The analyst has also added that the extension of 3 years for GIDC payments with 60 instalments to be paid over 5 years vs. 24 instalments over 2 years as per initial SC decision, shall be favourable for FFBL which has the cash to cover ~40% of GIDC payment as per latest financials (PkR8bn vs. GIDC payment of PkR22bn).

As per initial working, FFBL would have witnessed a shortfall of PkR4bn per annum for meeting net cash burden based on expected CFO in CY21 (per annum CFO is PkR3bn on average vs per annum GIDC payment of approx. PkR7bn).

The company has recently issued a 38.3% right to raise PkR5.0bn. To add, MARI has also expressed interest in the acquisition of majority shares in wind power projects. FFBL has a 35% stake in Foundation Wind Energy I & II each, where we value the FFBL’s stake in the projects at PkR8.7bn (PV of ROE).The increase in price of DAP will also add its revenue following consumption in agriculture sector of Pakistan.