Urea sales surge 81% in June

Rise comes on back of inventory restoration, sowing of cash crops

ISLAMABAD:

Fertiliser products across the board have witnessed a significant increase in sales during June 2020 due to the inventory restoration move taken by the dealers on anticipation of a rise in prices amid ambiguity over subsidy and sowing of cash crops across the country.

Among individual products, urea sales increased by 81% in June 2020 compared to June 2019. During the first six months of 2020 urea sales declined by 7% in comparison to last year due to locust attack in main agriculture areas coupled with the weak performance of maize. Urea prices remained lower by 8% during June 2020.

Meanwhile, DAP sales followed the trend and increased by 12% in June 2020. Domestic DAP prices declined by 5% in the previous month, while DAP price in the international market declined by 12% year-on-year in June 2020. The decline in domestic prices was less due to rupee devaluation.

Urea sales of Fauji Fertiliser Company (FFC) increased 72% in June 2020. During the first six months of 2020, FFC has outperformed the industry by witnessing a year-on-year increase of 7% as compared to a 7% decline in the industry urea sales. However, FFC DAP offtake declined by 49% year-on-year in June due to lower imports done by the company. FFC current inventory for urea and DAP stands at 16,000 and 93,000 tons, respectively.

Despite a 25% year-on-year increase in urea production in the first six months of 2020, Engro Fertilisers Limited sales declined by 3% due to higher urea prices earlier this year.

Meanwhile, sales of Fauji Fertiliser Bin Qasim Limited (FFBL) increased 84% in June 2020. However, during the first six months of 2020, FFBL was able to outperform the industry by witnessing a 24% increase in both urea and DAP sales, whereas, industry offtake of both products declined by 7%. FFBL's DAP inventory stood at 229,000 tons at the end of June 2020.

Foundation Securities analyst Usman Arif told The Express Tribune, "Major fertiliser products witnessed a significant increase in sales as dealers restored their inventory levels in anticipation of a hike in fertiliser prices due to expectation of an increase in gas prices."

Moreover, rumours of nitrogen-based fertilisers not falling under government subsidy scheme amid delay in finalisation of subsidy disbursement plan along with sowing of cash crops are other reasons for higher sales.

Published in The Express Tribune, July 28^th, 2020.

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