Dark days for fertiliser industry continue

Sales decline 5% on drop in production during January to November 2011.

ISLAMABAD:

Sales of urea, the most widely used fertiliser, declined by 5% in the period from January to November 2011 due to persistent gas outages faced by manufacturers which has led to a drop in production levels.

The four plants which are on the Sui Northern Gas Pipelines Limited network remained the main victims of the chaotic situation due to gas shortage.

The dark days are expected to continue as the government in a new gas load management plan has agreed to cut-off gas supply to the four plants on the SNGPL-based pipeline. The four plants include Engro Corporation’s Enven, Pak-Arab Fertilizer, Agritech Fertilizer and Dawood Hercules Fertilizer.

Similarly, another fertilizer, di-ammonia phosphate (DAP) witnessed a decline in sales by 18% to 1.01 million tons on a yearly basis against 1.24 million tons in the same period last year, according to data released by National Fertiliser Development Centre on Tuesday.

Unavailability and higher prices of both key fertilisers due to black marketing and hoarding can be attributed to the severe plunge witnessed in sales inspite of the low base year due to damage done by the historical floods of last year, said Summit Capital analyst Sarfraz Abbasi.

Among listed urea players, Engro posted a substantial growth in its urea sales of 35% to 1.16 million tons in the first eleven months of 2011 against sales of 0.86 million in the same period last year.

Fauji Fertilizer Company showed a negligible 2% decline in sales during while Fauji Fertilizer Bin Qasim sales fell by 14% on a yearly basis. Dawood Hercules posted the highest decline of 50% to 0.19 million tons on the back of heave outages being faced on the SNGPL-based network.

Urea manufacturers on the SNGPL network were blessed with gas in November as production rose 28% to 435,000 tons on a monthly basis.

Future outlook

The country is currently faced with an acute gap between demand and supply of urea because of persistent gas curtailment and load-shedding, said Abbasi.

Plunge in production poses a severe threat to the yield on crops, resultantly, the country might miss its agriculture-based export targets and also further aggravate inflation in the country which is already higher than the regional peers.

In addition to this, we also believe that lower production in the country will force the government to import more which will eventually put the further burden on import bill, adds Abbasi.

Published in The Express Tribune, December 28^th, 2011.