Pakistan’s overall fertilizer sales decline 51% in January 2020

KARACHI: National Fertilizer Development Center (NFDC) released fertilizer data for January 2020 wherein total fertilizer offtakes clocked-in at 388k tons, down 51% on yearly basis and 77% on monthly basis.

With regards to production activity, cumulative production for the industry rose 3%, however on a MoM basis production fell 5% to 608k tons during January 2020.

Industry urea sales arrived at 262k tons, depicting a notable fall (-54%YoY) during January 2020 as compared to 564k tons recorded during same month of last year. Moreover, on a MoM basis urea sales fell 81%.

“We associate the notable decline in volumes to hefty pre-buying witnessed last month leading to high dealer inventory and speculations during January relating to potential reduction in urea prices which exacerbated the decline in urea offtakes,” a report issued by Pearl Securities said.

With regards to company-wise performance, offtakes for all major fertilizer producers (except Fatima Fertilizer) witnessed considerable decline during January 2020.

Fauji Fertilizer (FFC) urea volumes clocked-in at 73k tons, whereas Engro Fertilizers’ offtakes fell 54%YoY to 75k tons. Moreover, Fauji Fertilizer Bin Qasim (FFBL) off-takes arrived at only 0.4k tons during the month while volumes for Fatima remained stagnant at 108k tons.

In terms of urea inventory levels, lower volumes sold during the month resulted in total inventory for the industry ballooning to 390k tons (+91%MoM).

Industry DAP off-takes exhibited decline of 41% on yearly basis and 77% on monthly basis to 44k tons during the month. On the inventory front, DAP inventory rose 8%MoM to 533k tons.

Urea/DAP prices remained flat on MoM basis at Rs2,016/Rs3,600 per bag during January 2020. Starting February 2020, fertilizer players passed on the benefit of GIDC reduction to customers by proportionately reducing urea prices by Rs300/Rs160 per bag.

Moreover, owing to softened international DAP prices and PKR stability, fertilizer players reduced DAP prices by Rs100/bag effective from Feb 01, 2020. With respect to international pricing, urea/DAP prices remained flat at $246/$293 per ton during January.

Going forward, with higher input prices exacerbating farm economics, analysts expect urea offtakes to remain lower as compared to the previous year. “However, we highlight the recent government decision of removing GIDC along with deferring gas price hike as positives which could provide much needed support to agri-growth and help restrict fall in urea offtakes. As for DAP, despite recent reduction (Rs100/bag) in prices, we expect DAP demand to remain under pressure as prices are still considerably high and will consequently continue to impair demand outlook,” Pearl Securities report noted.

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