Fertiliser industry decries supply overhang

Official says dealers have built inventory in anticipation of price rise

LAHORE: Despite record sales of 1.3 million tonnes in December 2019, leading to annual sales of 6.2 million tonnes, the fertiliser industry remained in a supply overhang as dealers accumulated inventory in anticipation of a price increase, said an official of a fertiliser company.

"The excess speculative purchases of urea have resulted in a significant inventory in the channel, estimated to be 0.4 million tons," the official said. Agronomic demand has, however, remained in the range of 5.7 to 5.8 million tons in line with the last five-year average. With demand expected to remain in a similar range in the new year, the high channel inventory will restrict sales of the fertiliser industry. "With opening inventory of 0.6 million tons, with the channel and industry, coupled with agronomic demand for 5.7 million tons, industry sales are expected to be around 5.3-5.5 million tons in the current year," he said.

The official claimed that the inventory build-up had largely been due to the year-long operation of liquefied natural gas (LNG)-based fertiliser plants with production of 760,000 tons in 2019, almost equating the industry and channel's closing inventory of 0.6 million tons.

"Furthermore, the operation of LNG-based players has not yielded benefit to any of the stakeholders and has instead been a burden on the consumers, producers and government," the official said. "The government has had to deal with the outflow of nearly $210 million on LNG import." 

Published in The Express Tribune, February 4^th, 2020.

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