Urea sales hit six-year low in 1QCY26
Pakistan's urea sales dropped sharply to a six-year low in the first quarter of calendar year 2026 (1QCY26), reflecting a significant slowdown after aggressive discount-led buying in the previous quarter, analysts and industry data show.
"Urea sales have dropped to a 24-quarter low of 1.04 million tonnes in 1Q2026 as the companies rolled back the discounts offered previously, wherein hefty advance buying was witnessed in December 2025," noted Topline Securities.
The decline follows an unusually strong October-December 2025 period, when fertiliser companies offered steep discounts to reduce elevated inventory levels, triggering heavy advance purchases by dealers.
Explaining the trend, Abdur Rafay, Fertiliser Analyst at Topline Securities, said the primary reason behind the decline was the front-loading of demand in the last quarter of 2025. "Companies offered massive discounts in the October-December period to manage high inventory levels. Dealers responded by piling up stocks in advance, which reduced their need to buy in the January-March quarter," he noted.
Major producers, including Engro Fertilisers and Fauji Fertiliser Company (FFC), had offered discounts of up to Rs400 per bag during the fourth quarter, encouraging bulk purchases ahead of the Rabi season. However, once these discounts were withdrawn and prices normalised in early 2026, dealer activity slowed considerably.
Rafay added that the January-March period also typically sees lower seasonal demand, as much of the Rabi-related buying is completed in the preceding quarter. "When discounts were rolled back and prices increased, dealers already had sufficient inventory. That's why sales remained low despite stable demand," he said.
Industry experts emphasise that the decline does not signal weakness in the agriculture sector. Pakistan's annual urea demand remains strong at over 5.5 million tonnes, and overall fertiliser consumption continues to grow in line with improving farm economics. "The demand is intact. What we are seeing is a timing shift rather than a demand contraction," Rafay explained.
Supporting this view, a fertiliser sector preview report by Optimus Capital Management noted that overall industry offtakes remained broadly flat on a year-on-year basis in 1QCY26, despite a sharp sequential drop from the previous quarter. The report added that the fertiliser sector's net profitability is expected to reach Rs26.1 billion in the first quarter, up 6% year-on-year but down 30% quarter-on-quarter, reflecting the high base created by discount-driven sales in late 2025.
The surge in fourth-quarter sales was largely driven by inventory management strategies. Fertiliser companies had accumulated stocks exceeding one million tonnes, prompting them to offer significant discounts to stimulate dealer buying, who purchase on discount but sell at usual prices, clearing excess inventory and ensuring adequate supply for farmers who cannot buy in bulk or in advance.
As a result, inventory levels have now normalised to about 600,000-800,000 tonnes, which analysts view as a healthy range for the industry. High inventory levels typically indicate weak dealer demand, while lower levels suggest improved market flow and pricing stability.
Supply-side challenges also influenced market dynamics during the quarter. According to the report, gas supply disruptions at RLNG-based plants, including those operated by Fatima Fertilizer and Agritech Limited, constrained urea production. Some companies also diverted gas towards DAP production due to higher margins, further tightening urea supply. Market share trends shifted as well, with FFC strengthening its position. The company captured approximately 58% of the urea market in early 2026, gaining ground amid production constraints at competing plants.
Looking ahead, analysts expect urea sales to recover gradually as dealer inventories are drawn down and demand from the upcoming Kharif season picks up. However, risks remain, including potential gas shortages and price distortions caused by differences between domestic and international urea prices.
Meanwhile, the outlook for DAP remains more uncertain due to its reliance on imports. Rising global prices and supply constraints are expected to keep DAP prices elevated, potentially affecting affordability for farmers.
The sharp decline in urea sales during 1QCY26 appears to be a temporary correction following an exceptional quarter. Analysts maintain that underlying agricultural demand remains strong, and the sector is likely to stabilise in the coming months as market dynamics normalise.
DESIGN: MOHSIN ALAM