Urea sales clock in at 375,000 tons in Oct

KARACHI: Urea sales clocked in at 375,000 tons in October, up four percent over the same month a year earlier and 110 percent over the previous month as nutrient’s demand for winter crops surged, analysts said on Monday.

“The sequential growth was largely due to seasonal effect, however the off-take is in line with the 10-year average October sales of 373,000 tons,” Fahad Rauf, an analyst at Insight Securities said.

But, diammonium phosphate (DAP) sale remained flat month-on-month at 387,000 tons in October, while there was a slowdown year-on-year due to higher base effect.

“DAP off-take still beats 10-year average October sales of 300,000 tons,” Rauf added.

Urea sale grew 18 percent to 4.5 million tons in the first 10 months (January-October) of 2017. DAP sales also soared 23 percent to 1.7 million tons in January-October. The 10-year average for October sale stands at one million tons.

The key sales emerged after the first half as farmers refrained from buying before the budget for the current fiscal year as they were awaiting subsidy announcement.

Government reduced sales tax on DAP to flat Rs100/bag.

Rauf said industry urea production remained on the lower side at 440,000 tons due to lower utilisation by Fauji Fertilizer and closure of Fatima Fertilizer (negative margins on liquefied natural gas) and Agritech (gas supply issues).

“Lower production coupled with 108,000 tons of urea exports in October (530,000 in 10 months) improved industry inventory position to 690,000 tons as compared 733,000 tons as of September-end,” he added.

Topline Securities, in a report, said international urea prices stabilised in October, while prices in Middle East and Chinese prices ranged $270-280/ton, while US prices were between $240-255/ton.

“The recent strengthening in prices was driven by a host of factors: lower Chinese exports, higher coal price, US dollar weakness, and resurgence of global demand,” the brokerage said.

“Going forward prices may remain volatile as new capacities come online and seasonal demand adjusts due to climate changes.”