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Urea sales post massive 83 percent growth in June


July 2, 2020

KARACHI: Urea sales posted a massive surge of 83 percent year-on-year to 1.2 million tons in June as the government’s agriculture incentives triggered major rush to price benefits, analysts said on Wednesday.

In June, urea sales were up 390 percent month-on-month.

“Uptick on a monthly basis was owed to seasonality factor along with reopening of economy during the month,” said analyst Tahir Abbas at Arif Habib Limited. “In particular, FFC (Fauji Fertilizer Company) and FFBL’s (Fauji Fertilizer Bin Qasim) cumulative urea offtake recorded a massive increase of 76 percent year-on-year to 610,000 tons in June whereas month-on-month surge arrived at 361 percent.”

In June, diammonium phosphate (DAP) sales depicted a 28 percent year-on-year decline, whereas it remained strong 88 percent month-on-month to 115,000 tons.

In May, dealers and farmers held back their purchases for the materialisation of subsidy announced earlier by the federal government.

Under an agriculture package, subsidy of around Rs37 billion would be offered to farmers on purchase of fertilisers.

This would include subsidy of Rs925 per bag of diammonium phosphate and other phosphatic fertilisers and Rs243 per bag on urea and other nitrogen fertilisers.

In 1H2020, urea sales are expected to clock in at 2.6 million tons compared to 2.8 million tons in 1H2019, down nine percent.

By the end of June, closing inventory of urea with local producers stood at 400,000 tons as compared to 1.1 million tons a month back. On the other hand, tally for DAP suggested an inventory position of 466,000 tons in the same period.

“As inventory levels have dropped to 400,000 tons vis-à-vis 1.1 million tons a month back and demand appears strong in the upcoming Rabi season, with an estimated offtake of urea at 6 million tons in 2020, we view production to arrive at 5.5 million tons,” said Abbas.

With the government’s decision to supply re-gasified liquefied natural gas (RLNG) at concessional tariffs to Agritech and Fatima Fertilizer that remained closed due to unavailability of feedstock for seven months, urea production is expected to be added with another one million tons.

“Last year, when the government operated two fertiliser plants on RLNG to bridge the shortfall of urea the urea production clocked in at 6.2 million tons, highest ever in the history,” said Abbas. “The government should operate both the fertilizer plants for the remaining months of CY20 to bridge the expected shortfall of 0.5 million tons of urea.”