KARACHI: The country’s fertiliser sector relating to urea and DAP sales posted impressive growth in May, but urea inventory levels of these products remained in negative territory during January-May 2021.

Urea offtake grew 109 per cent to 501,000 tonnes in May compared to 240,000 tonnes in May 2020. While month-on-month urea sales were 62 per cent higher than 309,900 tonnes in April.

Quoting the figures of National Fertiliser Development Company (NFDC), research analyst at BMA Capital Management, Noor Huda Shaikh said urea sales in 5MCY21 grew by a whooping 47pc to 2.2m tonnes from 1.5m tonnes in the same period last year.

DAP offtake swelled by 185pc to 173,000 tonnes in May from 61,000 tonnes in May 2020 while its sales grew 279pc growth from 46,000 tonnes in April.

A rise of 26pc was recorded in DAP sales in 5MCY21 to 533,000 tonnes from 422,000 tonnes in the same period last year.

The country’s urea inventory plunged by 45pc during May to 612 tonnes from 1.116m tonnes in May 2020 but urea stock of the month was 15pc more from 531,000 tonnes in April.

Commenting on the reasons of soaring urea and DAP sales and urea inventory outlook, Noor Huda attributed rising urea and DAP sales to improved agronomics and low base effect.

He said urea offtake surged in May due to resumption of RLNG based plants in March, while urea production continued its uptrend.

He recalled that urea volumes during May 2020 were lower owing to delayed purchases by farmers in anticipation of materialisation of subsidy approved by ECC in the same month which included a relief of Rs243 per bag on urea. Seque­ntially urea sales had improved by 62pc due to the onset of Kharif season.

Noor said DAP sales reached new high during 5MCY21 and on the pricing front, DAP prices are still hovering at high levels between Rs 5,500-5,600 per bag as international DAP prices continued their bullish trend due to prolonged supply crunch (current prices at $570/tonne, up 48pc current year to date).

He noted that phosphoric acid prices are also on an uptrend ($998/tonne, up 45pc current year to data). Given the supply imbalance, he expected that the phosphate market to remain strong in the near term.

Urea inventory improved by 15pc to 0.61m tonnes in May compared to April owing to resumption of RLNG supply to closed fertiliser plants in March. This is still relatively lower compared to the inventory level of 1.12m tonnes in the same period last year.

He said inventory would normalise by the end of the year and would clock-in between 0.35-0.40m tonnes in December. However, with the looming RLNG crisis amidst possible closure of Engro’s LNG terminal due to maintenance reasons, the government may curtail supply to LNG-based plants to maintain gas load, which would further lower inventory levels and keep pricing power of fertiliser players intact.

Additionally, the gap between local and international urea prices has further widened with prevalent local prices in the country nearing Rs1,740 per bag, whereas international prices are hovering at $450 per bag (landed equivalent to Rs4,600 per bag).

This keeps the industry players in a favourable position to pass the impact of rise in gas prices or other input costs, Noor said.

Published in Dawn, June 26th, 2021