17 April 2004	Saturday	26 Safar 1425

KARACHI, April 16: Urea offtake in March improved by 41pc, while DAP sales registered a decline of 69pc as compared to the same month last year.

According to numbers released by the National Fertilizer Development Centre (NFDC), urea prices slightly increased by 0.5pc, while DAP prices crossed the Rs1000 per bag mark registering an increase of 3pc as compared to Rs980 per bag in February.

Sale of urea during all of financial year 2004 was expected to be up by 3-4 per cent, on the back of availability of farm loans, attractive prices of cotton, increased support prices of wheat and availability of water.

Urea offtake during March this year was higher than the average off-take during the same month in earlier years, due to stocking up of the fertilizer by dealers and farmers ahead of a Rs5 per bag increase in urea prices for the Kharif season by manufacturers, who attempted to absorb the impact of culmination of 10-year subsidy on feedstock gas for the expansion plants of Fauji Fertilizer Company and Engro Chemical.

Urea off-take during March 2004 stood at 178,000 tons as compared to 126,000 tons during the same month last year. While cumulative urea off-take during the Rabi season was reported to be around 2,397,000 tons as compared to 2,142,000 tons during Rabi 2002-03 posting a growth rate of 12pc.

DAP off-take continued to decline due to continuously rising prices. During March 2004 DAP off-take was 25,000 as compared to 80,000 tons during March 2003 registering a decline of 69pc.

On the other hand cumulative DAP off-take during Rabi 2003-04 registered an improvement of 2pc to 769,000 tons as compared to 456,000 tons during the Rabi season of 2002-03. The month started with an opening inventory of 25,000 tons and no imports were reported during the month, while local production of DAP was 42,000 tons.

Market reports suggested that during March average retail prices of urea slightly increased by 0.5pc to Rs432 per bag, from Rs430 per bag in February. Fertilizer manufacturers had already hinted at urea price increase by Rs5 per bag, which was expected to take the average retail prices to around Rs440 per bag.

Mohsin Ahsan, sector analyst at Global Securities affirmed that urea sales had grown despite extraordinarily high volumes observed in December 2003 and expectations of slowdown in 1QCY04. Sales jumped 19pc year-on-year.

Urea prices had been slowly inching up since Oct '03 as manufacturers were trying to pass on the impact of increase in feedstock prices. Feedstock prices went up by 7.5pc effective July 1, 2003, but the government barred companies from increasing product prices.

To maintain gross margins companies need Rs18- 20 per bag increase in urea price. Urea prices have gone up by Rs12 per bag compared to 1QCY03 and Rs10 per bag since Oct '03. Strong off-take resulted in low inventory levels by the end of March 2004.