Urea sales likely to rise 19pc in Nov

KARACHI: Urea sales are likely to increase 19 percent year-on-year in November to 741,000 tons on growing demand from farmers after a substantial cut in the nutrient’s prices, a brokerage house said on Tuesday.

Brokerage Topline Securities Limited, in a report said the sales recovery would be due to “delayed farmer buying during 1H2016.” Recently, the government slashed feed stock gas tariffs by Rs200/million metric British thermal unit (mmbtu) to Rs400/mmbtu. The government is yet to issue a notification.

“Given the record high inventory levels of 1.5 million tons in October (and 1.2 million tons in November), this cost saving is expected to be passed on to the consumers, resulting in Rs50-60/bag price cut,” it added.  In November, sales of imported urea are expected at 5,000 tons as against 15,000 tons in the same month a year ago.

“We expect the sale trend to remain positive in December,” the report said. It forecast urea sale at 5.1mn tons during the current year of 2016, down 9.2 percent year-on-year.

In August, the government approved a cut of Rs476 per 50-kilogram bag of imported urea to Rs1,310 to clear surplus with the National Fertilizer Marketing Limited, the state-owned supplier.

The supplier had to bear millions of rupees in additional cost to handle 276,000 available stocks at the moment 

The report said  total urea sales, local  and imported, which represent 75 percent of the total fertilizer sales in Pakistan, are likely fall 4.3 percent year-on-year to reach 4.6 million tons.

“Urea sales of local manufactures in the last eleven months of 2016 are likely to increase 7 percent to 4.55 million tons while imported urea off-take is likely to clock-in at around 230,000 tons as compared to 505,000 tons last year,” the report said.

It added that company-wise monthly breakup reveals that all fertiliser companies “are likely to post an increase in their urea off-takes in November 2016.”

“Engro Fertilizer posted above average growth of 248 percent month-on-month, due to low base effect, as the company witnessed below expectation sales numbers for the month of October.”

Engro posted urea off-take of 63,000 tons in October 2016, on back of delayed dispatches. “The off-take numbers for November 2016 are likely to show recovery,” the report said.