Govt mulls proposal to import 0.5 million tonnes urea

LAHORE: Pakistan will have a sufficient urea stock for the upcoming winter crop season as the government is weighing a proposal to import half a million tonnes of fertiliser to meet the farmers’ demand, a top official said on Monday.  

Fertiliser makers are, however, against the proposal, saying local stocks are enough to be poured in farms.  

Manzar Hayat, managing director of National Fertilizer Marketing Company (NFML) told The News the company currently has zero stock of urea – the key agriculture input. 

“We forwarded a summary to the government to import urea on August 15,” Hayat said. “There is no response as yet.”  NFML’s official said urea consumption in summer crop season increased. Import is also imperative to check hike in domestic fertiliser prices, he added.     

Government forecast urea demand at 3.2 million tonnes for the upcoming crop season as against the production of 2.782 million tonnes. Last year, production of 2.9 million tonnes almost met the local demand. 

Urea off-take increased 20 percent to 4.17 million tonnes in the past nine months, while sales of diammonium phosphate (DAP) rose 44 percent to 1.34 million tonnes during the January-September period, brokerage reports said. 

In September, urea off-take decreased 81 percent month-on-month (MoM) and fell 40 percent year-on-year (YoY) to 179,000 tonnes. However, DAP sale surged 363 percent MoM and soared 259 percent YoY to 384,000 tonnes during the last month.  Analysts said slowdown in urea sales was due to end of summer crop season. Dealers built up inventory in anticipation of price hike following cut in government subsidies.  

“The astronomical surge in DAP sales in September was because of the beginning of the Rabi (winter crop) season and reduction in sales tax to flat Rs100/bag,” Momena Mumtaz, an analyst at Karachi-based Taurus Securities said. 

Analysts are bullish on recovery in urea sales as demand is increasing and inventory level is decreasing. Mumtaz said inventory would settle at 0.5 million tonnes by December end as the industry would consummate urea export quota of 0.6 million tonnes by yearend. 

Sher Shah Malik, executive director of Fertiliser Manufacturers of Pakistan Advisory Council said currently urea closing stock stands at 719,000 tonnes.  “The country will have 3.6 million tonnes of urea for the farmers. Even if 3.2 million tonnes are consumed there will be 400,000 tonnes in surplus,” Malik said.

“So, there may be a need of further export instead of import.” In October, local industry produced 394,000 tonnnes of urea, while carryover stocks stood at 818,000 tonnes. Of total, 153,000 tonnes were exported and 340,000 sold locally. 

Analyst Yawar Saeed at First Capital Equities forecast that inventory would go down due to a possible diversion of gas to domestic users in winter and an expected decline in production by Engro Fertilizer, the second largest producer, on account of its plant maintenance. 

“Long-term prospect depends on effective inventory management and pricing dynamics,” Saeed said. Mumtaz of Taurus Securities said urea prices have finally shown a massive recovery with a rise in its international price to $280/tonne.

“We expect the fertiliser prices to be stable, thereby leading to a price hike in the domestic market too,” she added. “Local fertiliser players have also picked up pace in exports due to higher export-realised prices and some pricing power in the local market after the expected ease in domestic inventory levels.”  Analyst Adnan Sheikh at Topline Securities said discounts have been eliminated. 

“We have increased our urea price assumption from Rs1,330/bag to Rs1,350 for the remainder of 2017 through 2018,” Sheikh added. “Key risks may stem from a further buildup of inventory, decline in international prices, subsidy withdrawal and pest attack.”