KARACHI, Jan 10: Urea (fertiliser) manufacturers have increased selling prices by Rs10 per bag, company executive at a leading producer said on Wednesday. The price increase is effective January 1.
In response to a query, the chief executive of Engro Chemical Pakistan, Mr Asad Umar, said the increase had been made to partly cushion the inflationary pressures. He said higher cost of sales was one of the two reasons that fertiliser companies have to raise prices.
The other reason, he mentioned, was the gas price rise, but since there had not been any upward revision in gas prices of late, the current increase in urea prices had nothing to do with the cost of gas.
Market sources say that ferti-
liser companies’ have generally been able to transfer the escalated costs to end-consumers because of their better bargaining position due to shortage of supply and robust demand. Head of Research at InvestCap Securities, Mr Ali Hussain, commented: “The increase in prices is small (around 2 per cent) when compared with our inflation rate. But the current increase in price of urea appears to be more of a result of strong fertiliser demand than pressures from cost side. The gas prices are not expected to be increased in the upcoming revision as average oil prices have recorded a decline in the past six months. Around six months back, in contrast with current circumstances, urea prices were raised as a direct result of increase in fuel and feedstock prices.”
Zuhair Abbasi, analyst at CapitalOne Equities in his Jan 9 report on the fertiliser sector stated that the year 2006 was a low and slow growth year for Pakistan’s industrial growth. Fertiliser industry being no exception was set to post a very negligible growth on y-o-y basis. With the last month’s numbers yet to arrive, the analyst estimated that urea off take would post a 2.5 per cent growth on y-o-y basis. Whereas, DAP demand, despite so much happening around in DAP fertiliser context, might well put a decent three per cent growth.
But the analyst says: “CY07 is likely to begin with pleasant news for the companies, as the government planned to decrease gas prices by 7 per cent to 10 per cent. This would certainly ease the margins and the bottom lines of manufacturers,” the analyst said in his report.
