Sale of Urea Fertilizer surged by 8% in July 2021
Moin Khan
Sales of urea fertilizer have surged by 8% year on a year basis (YoY) to 0.62 million tons on July 21 owing to better farm economics and pre-buying by dealers in anticipation of rising in urea prices reveals data released by NFDC. This takes the inventory levels to 0.32 million tons at the end of the month.
Given the low levels of inventory, we reiterate that the pricing power of industry players is still strong, evident by the recent hike in urea prices by PKR 50/bag in Aug 2021, BMA capital said in a report.
Urea Fertilizer Price in Pakistan
The pricing power of fertilizer players is high, and any potential increase in costs, including rising gas tariffs, may be passed on to end consumers. Recently, urea prices increased by PKR 50 per bag in Aug 2021, taking current market prices to Rs 1,779 per bag, which is still at a sizable 62% discount compared to international prices.
Read More: FFC, EFERT increase urea fertilizer prices further by Rs 50 per bag
What is urea used for? Fertilizer plants produce it across the world. There are also several plants in Pakistan that are producing it. The major use of urea is in the agriculture sector. The farmers use it for different crops to boost production.
DAP Fertilizer offtake
On the other hand, DAP offtake dropped by 22% YoY to 0.19Mn tons on account of higher prices and the high-base effect.
Note that domestic DAP prices continue to trade between PKR 5,750-6000/bag today, following an increase of PKR 200/bag by the Fauji group. Overall, during seven months of current yea 21, urea offtake has remained strong with a surge of 9% YoY to 3.5Mn tons.
However, DAP sales have declined by 6% YoY to 0.80Mn tons. Urea’s offtake rose by 8% YoY on July 21.
Urea production inched up by 3% YoY to 0.51Mn tons in Jul’21, while it largely remained stable MoM owing to the closure of RLNG based fertilizer plants (expected to resume production from Sep’21).
Alternatively, urea sales rose by 8% YoY to 0.62Mn tons during the same period on account of better farm economics and pre-buying buying by dealers in anticipation of a hike in urea prices on Aug 21.
Read More: Engro to increase urea fertilizer production
Sequentially, there was a drop of 10% as the Kharif sowing season neared its end.
Company-wise Sale
FFC and FFBL witnessed a surge in sales by 2.1x and 1.6x to 237000 and 50000 tons, respectively.
However, EFERT and FATIMA recorded a decline of 28% and 20% YoY to 240000 and 78000 tons, respectively, owing to the high-base effect.
To recap, EFERT had lowered its prices in the first half of current year 20 to compete with other players following the GIDC elimination which led to a higher offtake on July 20.
DAP volumes have clocked in at 0.19 million tons.
DAP offtake stood at 0.19Mn tons on July 21, depicting a drop of 22% YoY owing to a high base of 0.25Mn tons in SPLY, resulting from clarification on the subsidy front.
Read More: DAP fertilizer offtake continues to remain on the higher side
On the other hand, the sequential uptick in sales is likely on account of the arrival of import orders during the month.
On the pricing front, international DAP prices are trending at high levels with recent trade orders concluding at a price of nearly USD 660/ton.
The Fauji group recently raised local DAP prices by PKR 200/bag, taking current market prices to new highs of around PKR 6,000 per bag.
We expect limited exports from China and higher import demand in India and Pakistan to support international DAP prices in the near term. However, the prices are likely to normalize after the end of the Kharif season, BMA Capital said in a report.
Read More: FFC, FFBL increase the price of DAP fertilizer by Rs 200 per bag
