KARACHI: Fertiliser sales rose 25 percent year-on-year to 498,000 tons in July as its price decline encouraged buying, a brokerage reported on Monday.
Urea offtake remained robust over historical parameters amid strong farmer economics and lower urea prices after settlement of gas infrastructure development cess issue. Diammonium phosphate (DAP) offtake rose 24 percent year-on-year to 247,000, with soft domestic prices attracting seasonal buyers.
“We believe the government’s decision to exclude urea from the subsidy program opened the floodgates for demand in June and that momentum has persisted during July,” analyst Hammad Hussain at Optimus Research. “While offtake in July halved month-on-month, aggressive discounting activity and favourable farm economics sustained consumer demand.” Nutrient offtake was strong across all categories with nitrogen and potash offtakes exhibiting encouraging growth of 25 percent and 23 percent year-on-year, respectively.
Nitrogen phosphate and nitrogen, phosphorus, and potassium offtake increased 21 and 31 percent to 88,000 and 5,000, respectively. “We retain our positive outlook on the DAP market, especially for importers. We anticipate depressed regional DAP prices and Rs925/bag subsidy to improve DAP affordability,” said Hussain.
“Taking cues from the 2016 subsidy, we believe DAP offtake could easily achieve 20 percent volumetric growth if a subsidy mechanism is convened by Rabi season.” Production levels exhibited mixed trends in July with urea and DAP production declining by 12 and 2 percent, respectively, while calcium ammonium nitrate and nitrogen phosphate production rose 54 and 41 percent, respectively, primarily on account of Pak-Arab resuming operations.
Fertiliser prices started firming in response to robust demand. Price of urea (sona), DAP, CAN, NPK and NP prices increased 0.3, 0.5, 0.9, 0.2 and 0.4 percent. Engro Fertilizer extended its dominance over the urea market by achieving record market share of 58 percent.
The remarkable turnaround in EFERT’s performance is attributable to elevated dealer discounts and adequate demand from consumers. While EFERT’s July inventory is still four times the same period last year, “we believe the company has largely achieved its goal of normalising its inventory”.
Fauji Fertilizer Bin Qasim recaptured some of the market shares it ceded to importers over the past three months. The company’s market share improved 1,160 basis points to 42 percent. CAN offtake rose two thirds to 86,000 tons in July. CAN offtake was up nearly 21 percent in January to July.
“Despite the lumpiness in offtake, CAN production continues to grow unabated by double digit percentages with Pak-Arab restarting operations,” said Hussain. “July was no different with production escalating by 54 percent. We’ve previously highlighted a worrisome trend of piling CAN inventory since the start of CY20 due to elevated production levels.”