Urea, DAP sales fall on high prices

Updated December 27, 2018

Email

The situation is expected to change in the current month due to Rabi crop demand. ─ File photo
The situation is expected to change in the current month due to Rabi crop demand. ─ File photo

ISLAMABAD: Urea and di-ammonium phosphate (DAP) sales have dropped in November mainly be­­cause of high rates but the situation is expected to change in the current month due to Rabi crop demand.

The figures released by National Fertiliser Develop­ment Centre (NFDC) shows total urea offtake was recorded at 497,000 tonnes in November, showing a decline of 17.4 per cent year-on-year.

Similarly, DAP offtake decreased by 47pc to 265,000 tonnes against November 2017, and the sale of nutrients too faced a downward trend.

The government allowed import of an additional 100,000 tonnes of urea this December — taking the total limit to 1.1 million tonnes — to put a leash on local urea prices and tackle supply shortages.

Since November 2017, urea prices have witnessed an increase of 26pc.

Analysts said the raised import quota is unlikely to challenge pricing power of local manufacturers under current scenario as the local urea prices are still lower than the international rates.

This is thanks to the hefty subsidy government is offering on the chemical, currently estimated to be Rs845 per bag. The Trading Corporation of Pakistan informed the Economic Coordination Committee that the cost per 50 kg bag, excluding NFML charges (Rs21 per tonne), stood at Rs2,556 per tonne. But after the state subsidy, the new urea price per bag comes to be Rs1,712.

NFML had suggested that dealer booking price of imported urea be lowered by at least Rs100-150 than local urea brand price. The government will have to pick a Rs845per bag subsidy.

For DAP, the sales have been 8.1pc lower in 11MCY18 compared to the cumulative offtake in similar period last year. On the other hand, its prices surged by 29pc in one year since November 2017.

The increase in global oil prices was one of the factors triggering the rise of urea and DAP prices.

However, experts believe that the sales of urea, DAP and the nutrient will improve from the current month due to the demand for Rabi crop.

“In our opinion, the decline in nutrient consumption is just a temporary phenomenon as issues with sugarcane crushers are now resolved and crop harvest should resume, we expect the fall to reverse in December since sugarcane harvest is completed,” said Suneel Kumar, an analyst at Optimus Capital.

Published in Dawn, December 27th, 2018