Fertiliser sales fall as gas outages rise

Govt had announced a 45-day gas supply shutdown for plants on the Sui network.

Express February 28, 2011

KARACHI: Fertiliser sales fell 22 per cent to 540,000 tons in January on the back of increased curtailment of gas supply to the sector during the month.

Four of eight producers of urea, a type of fertiliser, remained idle in the month due to the reduction in gas supply, according to KASB Securities.

Urea plants of Fauji Fertiliser Bin Qasim Limited (FFBL) and Fatima Fertiliser have been shut since December 26, 2010 due to the country’s gas load management programme.

The government had announced a 45-day gas supply shutdown for all plants on the Sui network during January to March. It also announced a detailed gas outage plan for the fertiliser sector in December which included 20 per cent gas supply curtailment on the Sui network and 12 per cent on the Mari network.

Recent channel checks suggest that plants will resume operations from mid-February as gas supply will be restored after the 45-day shutdown, said KASB Securities analyst Farrah Marwat in a research note.

Pre-buying by dealers on an anticipated increase in fertiliser prices during the first quarter also softened the demand, said Marwat.

Prices of urea and di-ammonium phosphate (DAP), the two most widely used fertilisers, rose by 34 per cent and 45 per cent, respectively.

Higher urea margins at 23 per cent in January will more than compensate for lower production for the fertiliser makers, adds the research note.

DAP and urea sales

DAP sales registered a decline of 36 per cent to 59,000 tons in January, according to the latest fertiliser data released by the National Fertiliser Development Centre.

This was witnessed on account of high prices and enhanced gas curtailment for the FFBL’s plant, according to an analyst. Despite the complete shutdown for half the month, FFBL was able to register production of 25,000 tons against sales of 29,000 tons in January.

Engro sales, on the other hand, stood at 25,000 tons as the company imported 26,000 tons of DAP in January.

Urea sales also declined by 28 per cent to 394,000 tons due to the enhanced gas curtailment, which is estimated to be between 12 and 20 per cent.

Among major manufacturers, Fauji Fertiliser Company and Engro urea sales declined by six per cent and seven per cent, respectively.

Published in The Express Tribune, March 1^st, 2011.