July 10, 2003	Thursday	Jumadi-ul-Awwal 9,1424

KARACHI, July 9: Prices of urea have recently increased by Rs10 per bag to around Rs430 per bag, analysts quoting sources in fertilizer industry said on Wednesday.

Tanvir Abid, head of research at brokerage firm, Jahangir Siddiqui & Co. Limited observed that the increase in prices follows the 7.5 per cent rise in feedstock prices effective July 1 as per the Fertiliser Policy 2001. The analyst expects the upswing in price to be positive for the urea manufacturers, which would improve their gross margins as it would more than offset gas price increase.

Demand for urea during the first few months of the financial year 2003 had depicted a slowdown, but said Abid: “Industry sources, nonetheless, indicate that upsurge in June 2003 offtake has resulted in a year-on-year flat demand trend during the first half of FY03.” Sales during the coming months would show a favourable picture ensuing from improved water supply and heavy rains, predicted the analyst, adding: “Overall urea demand in the country seems to have stabilized with a 2-3 per cent annual growth foreseen in the intermediate term.”

Khalid Iqbal Siddiqui, who follows the fertilizer sector for brokerage, InvestCap thought that the fertilizer producers had reverted back to the original price of Rs425 per bag (retail prices vary from place to place and between brand to brand), while they had reduced prices towards the end of May by Rs10 per bag in order to get rid of huge inventories. He said that some pre-season buying had been seen towards June-end in anticipation of a further rise in prices owing to the latest 7.5 per cent increase in feedstock prices on July 1.

According to Mr. Siddiqui, the local fertilizer sector had witnessed a slight decline in urea offtake during first half of 2003, following an excellent performance in 2002, when full year sales had touched 4.3 million tons. Sales during first half of 2003 stood at 1.85 million tons, which represented 3 per cent drop from urea offtake of 1.9 million tons in the corresponding period of 2002. In June alone, the offtake was a huge 650 thousand tons.

Government efforts to get urea producers to lower prices, slowdown in sales at the start of the year owing to hectic selling efforts from producers towards the end of 2002 and anxieties regarding the onset of the 2003 monsoon season, were said to be some of the factors for lower sales in first half of 2003. But for all that, there had been sharp recovery in the second-quarter 2003, from over 20 per cent slump in sales witnessed in first-quarter of the year.