FFBL shuts down DAP plant on low demand

LAHORE: Fauji Fertiliser Bin Qasim Limited (FFBL), Pakistan’s only manufacturer of di-ammonium phosphate (DAP), has shutdown its plant for an indefinite period in the wake of low demand and glut in the farm nutrient market.

According to an announcement made by the company on Thursday, FFBL shut its DAP plant on December 21, 2022, with a view to efficiently manage its DAP inventory. During the shutdown period, planned annual maintenance activity would also be carried out next month to ensure reliability and sustainable safe operations at the plant, a spokesperson of the company added.

It maintained that after the completion of annual maintenance, the startup of the DAP plant would commence based on the fertiliser market situation. Notwithstanding the temporary closure, FFBL intends to meet the projected DAP demand in the country. “However, the urea plant is operating normally,” he stated.

DAP, the second most used fertiliser in the country, is a preferred compost for farmers because it contains both nitrogen (18 percent) and phosphorus (46 percent).

Among other factors, devastating floods and high cost of production have been blamed for low demand of fertiliser in the country. DAP sales for 11MCY22 are expected to clock in at 1.04 million tonnes, down a whopping 41 percent YoY, while November sales would likely stand around 231k tonnes, up 5 percent YoY.

FFBL would likely post off-take of 135k tonnes during November 2022. Fauji Fertilizer Company and Engri Fertilizer on the other hand, are expected to post DAP sales volume of 6k tonnes and 50k tonnes during the same period, respectively.

In a bid to encourage its application, the gederal government in late October reduced the price of DAP after consulting with the industry.

Federal Finance Minister Ishaq Dar while presiding over a meeting with DAP manufacturers shared that the present government was keenly focusing on giving relief to farmers to ensure smooth production in the country. He stressed on the fertiliser manufacturers to reconsider the price of DAP.

Consequently, fertiliser manufacturers agreed to significant reduction in the price of DAP.

The move was also considered inevitable, according to market insiders, especially keeping the downward trend in the international price of DAP. However, despite price adjustment, sales failed to pick up.

Muhammad Waqas Ghani of JS Global forecast that fertiliser sector sales would take a hit in the Rabi season, due to the flash floods that impacted agriculture land. “In the medium-term, we believe that opportunity cost resulting from dampened demand in the last quarter will restrain stock prices.” A further blow to near-term profitability could be expected from lower production due to prolonged plant turn-around by fertiliser manufacturers during Q4CY22, he added.