Fertilizer off-takes feel brunt of gas curtailment
April 08, 2011
Fertilizer off-take for the first two months of current year 2011 was hit by lower product availability, particularly of urea because lower production due to gas curtailment limited the product availability during first two months. Urea production was down by 5 percent on year on year bases to 694,000 tons, with most of the production loss accruing from the Sui based manufacturing plants, where urea production was down by a massive 65 percent YoY to just 46,000 tons.
Industry urea and DAP sales were down by 18 percent and 21 percent YoY respectively during first two months of current year, shows data by Invest and Finance Securities.
Latest data by National Fertilizer Development Centre NFDC shows that the Urea offtake was 804,000 tons during January-February period of 2011, registered a fall of 18 percent as compared to the same period last year when it was 984,000 tons.
The DAP offtake declined to 128,000 tons as compared to 162,000 tons of same period, 2M 2010. DAP sales dropped by 21percent in the first two months of 2011.
Company wise data shows that the Fauji Fertilizer Company FFC sales declined by 4.4 percent to 400,000 tons from 418,000 tons of same period of last year 2010. The month wise sales were down by 9 percent. Fauji Fertilizer Bin Qasim FFBL produced urea to the tune of 27,000 tons in Jan-Feb period of current year. The sales were hit by huge 43.1 percent.
Engro fertilizer’s offtake declined by 8 percent year on year bases. The product’s sales were 154,000 tons in the first 2 months as compared to 167,000 tons recorded in the same period of last calendar year. On month on month bases the data shows that the sales dropped by 10.6 percent. Meanwhile the new entrant Fatima Fertilizer recorded 95,000 tons in the first two months.
However, FFBL, DAP offtake surged by 7 percent to 75,000 tons as compared to 70,000 tons of the same period last year 2M2010, NFDC latest figures show. On the other hand Engro’s DAP sales declined by 37 percent to 45,000 tons from 71,000 tons.
Average retail urea and DAP prices during Feb-11 were up by a considerable 37 percent and 24 percent YoY to Rs 1,114 and Rs 3,211 per bag respectively. “Hike in urea prices by manufacturers in response to the gas curtailment in addition to shortage like situation have contributed to the urea price surge while domestic DAP prices are following the International DAP price trend, which are on a rise”, observes IFSL.
To make matters worse, the recent imposition of GST on fertilizers has further added to the upward spiral with urea prices being raised by Rs 135 per bag while DAP price has been increased by a significant Rs 700-800 per bag, taking retail prices to around Rs 4000 per bag. While urea demand is relatively inelastic, DAP sales will most likely come under pressure in second quarter of fiscal year 2011 given the recent price surge despite the impressive farmer economics.