KARACHI, March 25: The fertilizer data released by the National Fertilizer Development Centre (NFDC) reveals a respective 13 per cent and 28 per cent decline in urea and DAP sales during February 2004, compared to the same period last year.
Tanvir Abid, head of research at Jahangir Siddiqui Capital Markets (Pvt) Limited stated that the numbers released by NFDC indicated urea demand to be at 0.28 million tons as against 0.32 million tons during February 2003.
"This is primarily attributable to the seasonal slowdown following the end of Rabi buying season", he said, adding that the urea demand had, nonetheless, increased 14.4 per cent to 0.67 million tons during the first two months of 2004. During February this year, urea sales in Punjab had decreased 24 per cent while in Sindh it had recorded an increase of nearly 9 per cent.
Besides improved water supply, overall fertilizer demand in the country represented a major rebound on the back of improved farmer cash-flows, availability of credit and favourable weather.
"This is evident in the spectacular jump in Oct-Feb 2004 DAP sales to 744,000 tons compared to 669,600 tons during the corresponding months of the previous year", said the analyst.
Zaheeruddin Khalid, analyst at Elixir Securities Pakistan (Pvt) Limited, affirmed in his report on the fertilizer sector that though the demand in February 2004 had dropped compared to the same period last year, the Jan-Feb number was still 14.35 per cent higher year-on-year.
On the other hand an encouraging sign for the urea industry fundamentals was the Rs6 per bag increase in urea prices since December 2003. "Our industry contacts have revealed that the fuel gas price increase that was earlier expected in March has been delayed for all gas consumers", said Zaheeruddin.
Tanvir Abid expects outlook for the remainder of the current financial year and in particular the upcoming Kharif season to be upbeat. "A major pick-up in demand is expected starting from May 2004 after the lean months of March and April", stated the analyst, adding that Rabi 2003-04 had also shown impressive growth in fertilizer offtake over last Rabi.
Khalid Iqbal Siddiqui and Abdul Rasheed, who follow the fertilizer sector for Invest Capital & Securities (Pvt) Limited said they believed fertilizer manufacturers might raise prices further by around Rs5 per bag in second half of the current financial year, once the feed gas prices are increased, which is likely to take place from July 1, 2004.
The government was believed to be giving serious thought to the revision in Fertilizer Policy. According to Mohsin Ahsan, analyst at Global Securities Pakistan Limited, the previous policy was favourable for old plants but did not provide the much requested incentive of fixing fuel and feed composite price for 10-15 years.
"There are also some loose ends in the previous policy that need to be tied up", said the analyst. He observed that the stakeholders had asked for a number of incentives including 10-year tax holiday, fixing feed and fuel gas prices, removal of import duty on machinery imports, gas price fixed in rupees instead in the US dollars, removal of GST etc.
"However, we believe the most sought after issue will be fixation of fuel and feed composite price at Middle East level for next 10-15 years", said Mohsin Ahsan, adding that at present composite price of feed and fuel was around $1.3-1.4/mbtu (excluding GST) in Pakistan compared to $0.77/ mbtu prevalent in Middle East.
