KARACHI, Sept 13: Urea sales during the first seven months of 2005 (Jan-July) stood at 2.87 million tons, representing 16 per cent increase over 2.47 million tons in the previous comparable period.
According to the National Fertilizer Development Centre (NFDC) figures, urea sales during July 2005 portrayed a flat trend with off-take at 0.505m tons, lower by 1.1 per cent compared to 0.511m tons during July 2004.
NFDC noted that during July 2005, urea prices had increased by 3.4 to 3.6 per cent. DAP prices also rose by 2.7 per cent.
On the international front, a mixed trend was witnessed. During July, fob price of bulk ‘Yuzhny’ was quoted at $210-230 per ton as against $205-232 per ton the previous month. DAP prices in the Gulf were in the range of $250-262/ton fob bulk and $273-287/ton fob in the Jordan market.
NFDC mentioned that DAP sales during July 2005 declined 5 per cent to 0.165m tons as against 0.174m tons previously. Fertilizer sector analysts held the consensus view that due to the extraordinary jump in urea sales in the first half of the current year, slowdown in second half was in line.
Elixir Securities stated in its report that the slowdown was not surprising since dealers had been building up urea inventories in 1HCY05 in anticipation of a hike in urea price due to the stipulated increase in feedstock rates on July 1 (planned 12.5 per cent phase out in feedstock rates as per Fertilizer Policy 2001).
Urea prices at the retail level went up by around 3.4 per cent MoM, as producers gradually shifted the burden on to the farmers. Domestic urea production at 380kt was a marginal 3 per cent above the same period last year, and insufficient to meet local demand. Imported urea relieved the supply pressure as imports of 154kT along with last month’s carry over inventory absorbed the surplus demand.
Analysts at First National Equities (FNE) observed that retail prices of fertilizer products had showed an upward trend in Jul’05.
Urea prices, which were around Rs460/50kg bag in Jul’04 rose to around Rs500/50kg bag in the period under review, an increase of 8.7 per cent. DAP prices, which were around Rs940/50kg bag in Jul’04 increased to Rs1058/ 50kg bag in Jul’05, an increase of 12.6 per cent.
Analysts at Live Securities stated that Urea demand during 1H/FY05 (Jan – June 2005) soared 21 per cent to 2.36m tons as against 1.96m tons during the corresponding period of last year. The massive jump was partially contributed by speculative buying in anticipation of price increase effective from July.
Going forward, Invest Cap in its report maintained that overall in 2005, demand and prices of fertilizer had shown an upward trend, which was likely to continue. Higher agricultural credit off-take, coupled with abundant supply of water and higher support prices of crops were the major reasons cited for this growth in demand. “In addition, speculative pre-buying by some dealers and illegal exports of urea to Afghanistan to an extent, have also contributed to this upsurge in demand,” analysts said.
