Pakistan’s overall fertilizer sales decline 16% due to higher prices

KARACHI: National Fertilizer Development Center (NFDC) released fertilizer data for September 2019 wherein total fertilizer off-takes clocked-in at 683k tons, down 8%YoY/18%MoM.

With regards to production activity during the month, total industry production rose 15%YoY to 726k tons during September 2019 as compared to 631k tons recorded during corresponding month of last year.

Industry urea sales arrived at 405k tons (-16%YoY) during September 2019 as compared to 482k tons recorded during the same month of last year. Similarly on a MoM basis, volumes were significantly below August 2019 sales (-35% MoM).

“Decline in urea offtakes is primarily attributed to higher urea pricing after withdrawal of GIDC ordinance by the government, leading to manufacturers increasing urea prices by PKR200/bag, thereby adversely affecting urea volumes during the month,” a report issued by Pearl Securities said.

With regards to company-wise performance, major fertilizer producers witnessed a decline during September 2019 with Fauji Fertilizer FFC’s urea volume clocking-in at 175k tons (-22%YoY/-25%MoM) whereas Engro Fertilizer EFERT’s offtakes were also down 44%YoY/50%MoM to 94k tons.

Moreover, Fauji Fertilizer Bin Qasim FFBL’s off-takes arrived at 37k tons during the month (-49%YoY/-16%MoM). However, Fatima Fertilizer FATIMA recorded notable growth of 138% YoY with total urea offtakes arriving at 34k tons whereas on a MoM basis its offtakes fell 66%.

Consequently, market share of FFC, EFERT, FFBL and FATIMA arrived at 43%, 23%, 9% & 8% respectively.

In terms of urea inventory levels, total inventory for the industry increased 4x as compared to September 2018 inventory level while on  MoM basis, inventory levels rose 45% to 470k tons. Moreover, urea inventory held by FATIMA and EFERT accounted for 52% of total industry inventory at the end of September 2019.

Industry DAP off-takes exhibited a slender rise of 5%YoY to 210k tons during September 2019. Volumes for FFBL depicted considerable rise of 46%YoY/128%MoM at 107k tons while FFC’s DAP off-takes plunged 45%YoY/2%MoM to only 17k tons.

EFERT recorded 27%YoY decline to 36k tons whereas on a MoM basis, its DAP offtakes improved by a notable 88%. Moreover, FFBL continues to maintain its position as the leading DAP provider with market share of 51% whereas market share of EFERT/FFC clocked-in at 17%/8% during September 2019.

On the inventory front, DAP inventory declined 48%YoY/10% MoM to 378k tons with FFBL holding 53% of total industry inventory at the end of September 2019.

After withdrawal by the government of GIDC ordinance, fertilizer players raised urea prices by PKR200/bag to PKR2,040/bag during the month to offset hike in cost levels owing to higher feed & fuel gas tariffs.

Moreover, DAP prices incremented 2% MoM to 3,691/bag during the month. With regards to international pricing, Urea prices remained flat at US$267/ton while DAP prices fell (-6%MoM) to US$310/ton during September 2019.

Analysts highlight pending litigation pertaining to GIDC as a key event for the industry which could have a major impact on pricing dynamics and consequently on future demand. However in terms of near term outlook, with the start of Rabi season, offtakes are likely to remain elevated but we highlight prevailing higher Urea/DAP prices as a major risk factor which has the potential to impair demand going forward.

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