Fertiliser off-take grows 27 percent to 570,000 tons in April

KARACHI: Sales of fertilisers posted a strong growth of 27 percent year-on-year (YoY) to 570,000 tons in April as urea demand continued to surge on prospects of price hike, a brokerage reported on Monday.

In April, urea sale sharply rose 50 percent year-on-year to 375,000 tons. But, sales of diammonium phosphate (DAP) fell 28 percent to 69,000 tons during the month as compared to the corresponding month a year earlier.

“We attribute surge in urea off-takes by 50 percent YoY and 10 percent MoM (month-on-month) amid higher demand from dealers on account of anticipated increase in urea prices,” Waqas Ahmed, an analyst at Taurus Securities said.

Taurus Securities, citing data of the National Fertilizer Development Centre, said sales of urea surged 45 percent to 1.63 million tons, while DAP sale increased six percent to 434,000 tons in the January-April period over the same period last year.

In April, urea inventory rose 15 percent month-on-month to 436,000 tons to meet higher upcoming seasonal demand. DAP inventory, however, fell 12 percent to 190,000 tons during the month under review over the previous month.

“Comfortable inventory levels of urea and DAP have improved pricing power for local fertiliser manufacturers, as a result average urea prices increased 4.7 percent MoM (in April),” Ahmed said. Currently, international urea and DAP prices are hovering around $240 and $385 a ton, respectively and “are expected to remain steady, which along with removal of price capping (Rs1,400/bag) from urea would provide an added advantage to the local manufacturers,” he added.

In April, Fauji Fertilizer Bin Qasim (FFBL) recorded the highest growth of 149 percent year-on-year in sales, followed by Fauji Fertilizer Company (FFC) 82 percent and Engro Fertilizers (EFERT) 25 percent. EFERT enjoyed the highest growth of 69 percent year-on-year in sales in January-April, followed by FFC (58 percent).

Government, in the budget 2019, announced two percent uniform general sale tax on all fertilisers, which are expected to bring down prices of the agriculture key input. Government’s subsidy program brought urea price down to Rs1,400/bag during the last fiscal year of 2016/17 from Rs1,800/bag earlier. The subsidy scheme ended on June 30 last year. But, it was extended for the current fiscal year. The country is self-sufficient in fertiliser production with an annual capacity of six million tonnes little over the local demand. Yet, the government subsidises prices of fertiliser to help farmers sustain the impact of production cost.