KARACHI: The country’s urea offtake swelled year-on-year (YoY) by 148 per cent in January to 649,000 tonnes while diammonium phosphate (DAP) posted 88pc growth to 82,000 tonnes in the same month.

Urea inventory stood at 99,000 tonnes last month as compared to 390,000 tonnes in Jan 2020.

Quoting the data of the National Fertiliser Development Corporation (NFDC), BMA Capital Management Research Analyst Noor Huda Sheikh said urea sales rose due to improving farm economics and low base effect.

DAP offtake posted growth due to expected hike in prices.

On the prices front, local urea is currently trading at a significant discount of 50pc relative to international prices at around Rs1,730 per bag, whereas DAP prices have also risen over Rs4,900 per bag owing to global supply-chain disruptions.

He said international DAP prices surged by a massive 55pc YoY to $414 per tonne in Jan 2021 on account of shortage of product in the global market. As a result, local players raised DAP prices by Rs500 per bag in January 2021 and later Rs450 per bag in Feb 2021, taking the total increase to Rs950 per bag in the two months. Currently, DAP prices are hovering over Rs4,900 per bag in the market.

The industry recorded urea inventory of 0.1 million tonnes in Jan 2021 which is considerably lower relative to inventory levels in same period last year at 0.39m tonnes.

The DAP inventory also reached 0.1m tonnes in Jan 2021 as local players continued to face sourcing difficulties amidst rising DAP prices (currently near $530 per tonne). International DAP prices are expected to sustain their momentum till at least 1QCY21 due to supply-side disruptions and strong demand ahead of spring planting season. On the other hand, local urea prices (Rs1,730 per bag) are currently trading at a significant discount of 50pc, relative to international prices, keeping the local players in a favourable pricing position.

Published in Dawn, February 24th, 2021

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