KARACHI: Urea offtake fell eight percent and diammonium phosphate (DAP) sales rose almost twofold year-on-year in August, a brokerage reported on Wednesday.
Brokerage Insight Securities said a significant increase in DAP sales was attributable to preemptive buying from dealers in anticipation of price hike of phosp hate-based fertilisers and tight global supply.
In August, total urea production stood at 555,000 tons as against 568,000 tons in the same period last year, showing a decline of 2 percent year on year.
Resumption of production from Pak- Arab Fertilizers resulted in an increase of 81 percent/109 percent year-on-year in nitrogen phosphorus (NP) and calcium ammonium nitrate (CAN) off-take.
The company-wise data suggests that all major players witnessed an increase in urea off-take during the month apart from Engro Fertilizer (EFERT), which witnessed a decline of 13 percent year-on-year. As per the data, current urea inventory stands at 308,000 tons against 324,000 tons in the same period last year.
In 8MCY20, urea sales recorded a decline of 4 percent and stood at 3.8 million tons. Market share of Fauji Fertilizer (FFC) and EFERT increased 400 basis points year-on-year attributable to non-operation of Agritech Limited and Fatima Fertilizers.
DAP sales recorded an impressive growth of 180 percent/19 percent year-on-year/month-on-month. This increase in offtake was majorly driven by heavy buying from dealers in anticipation of hike in DAP prices.
FFBL’s DAP offtake in 8MCY20 recorded an increase of 33 percent year-on-year due to lower imports.
NP offtake registered an increase of 81 percent mainly attributable to resumption of operations from Pak-Arab plant. Current NP inventory of the industry stands at 155,000 tons.
CAN production also showed an uptick as compared to the same period last year due to operations of Pak-Arab fertilizer. In 8MCY20, CAN offtake witnessed an increase of 31 percent year-on-year.
“After showing a slowdown in the first quarter of CY20, industry’s urea offtake has normalized, while current inventory stands at 308,000 tons,” the brokerage said in a report.
“Currently, local urea price is at a discount of 40 percent to international urea price which further strengthens the case of urea price increase if extension in timeline of gas infrastructure development cess payable is not granted by the government.”
DAP prices increased sharply last month due to tight supply in the international market.
This situation bodes well for Fauji Fertilizer Bin Qasim (FFBL) and can provide respite to FFBL in 2HCY20. Likewise, NP offtake can also witness an uptick due to prevailing supply shortage of DAP in the local market.