Urea, DAP sales fall on subsidy uncertainty

KARACHI: Sales of urea and diammonium phosphate (DAP) fell 60 percent and 71 percent year-on-year, respectively, in May amid uncertainty on implementation of subsidy program for agriculture sector, analysts said on Wednesday.

Urea sales tumbled to 240,000 tons, down 60 percent year-on-year, as the lingering uncertainty from subsidy implementation continued to hurt the market, Optimus Capital Management said in a report.

DAP was unable to retain its momentum from last month as off-take sank 71 percent year-on-year to 61,000 tons, the sharpest percentage decline since September 2015. Fauji Fertilizer Bin Qasim ceded market share to fertilser traders/importers during May.

Decline in urea sales is majorly attributable to slowdown/halt in economic activities due to lockdown situation in different regions of the country, while dealers were reluctant to buy urea and DAP due to delay in subsidy.

One analyst at Insight Securities said fertiliser sales are likely to witness an uptick in June due to ease in lockdown and possible urea price hike attributable to proposed increase in gas prices.

“Going forward, we believe fertiliser off-take to normalise attributable to ease in lockdown and further clarity on

execution of subsidy scheme,” said the analyst.

Nitrogen and phosphate off-take were particularly dismal, declining by 60 percent and 69 percent to 134,000 tons and 36,000 tons, respectively.

Fauji Fertilizer continued its reign over the urea market with 47 percent market share, but Engro Fertilizers (EFERT) was the star performer with 24 percent month-on-month improvement in off-take to 103,000 tons.

Calcium ammonium nitrate (CAN) market performance was in line with the rest of the industry as off-take sank 56 percent year-on-year to 20,000 tons as Fatima struggled to offload incremental CAN production from Pak-Arab market.

NP and NPK (nitrogen, phosphorus, and potassium) off-take decreased 54 percent year-on-year and 39 percent year-on-year to 31,000 tons and 3,000 tons, respectively.

Fatima was the dominant player in NP market. However EFERT improved its market share to 7.3 percent, the highest in 6 months.

Fertiliser production was mixed in May with urea, DAP and NPK production down three, one and 15 percent year-on-year, respectively, while CAN and NP production was up 72 and 80 percent year-on-year, respectively, primarily on account of Pak-Arab resuming operations.

Prices slipped in nearly all product categories during May on a month-on-month basis. Prices of urea (sona), DAP, CAN, and NPK declined 0.8, 0.4, 0.4, one and 0.6 percent, respectively, while NP prices increased slightly 0.4 percent to Rs2,523/bag.