Fertiliser sales tank further

Fertiliser demand continues to drop this year due to high input prices and slow activity in flood-affected areas.

KARACHI: Fertiliser demand has continued to drop in the current year on the back of high input prices and slow activity in flood-affected areas.

Data released by the National Fertiliser Development Authority (NFDA) revealed that demand for di-ammonium phosphate (DAP) stood at a paltry 50,000 tons in August, a fraction of the 205,000 tons registered during the same period last year.

The data also showed a similar drop in urea sales. Only 302,000 tons of urea was sold in the outgoing month, compared to 528,000 tons in July and almost 600,000 tons in August 2009.

Analysts had expected demand to improve in the latter part of the last fiscal year as monsoon rains brought much-needed hydration to the agricultural areas. However, the optimism subsided in the wake of recent floods and experts have scaled back expectations of fertiliser sales subsequently.

“Advanced stages of rehabilitation of farmers, the wheat sowing season and receding flood waters will help improve fertiliser sales in the last quarter of this calendar year,” commented BMA analyst Omar Rafiq.

He acknowledged that fertiliser sales are unlikely to match last year’s tally, but “demand in the local market will still weigh in at about six million tons for the year, while the production of local industry stands at around 5.4 million tons.”

“The brunt of the reduction in demand will be faced by importers because there will only be demand for about 0.6 million tons of imported fertiliser,” added Rafiq.

Experts say that the demand for DAP has been significantly affected by rising international prices and they are not ruling out further increases in prices of either urea or DAP.

Gas supply curtailment has also contributed to rising fertiliser prices. Engro Chairman Asad Umar had earlier commented that “if gas curtailment continues it may affect the (fertiliser) industry production which may alter the demand and supply situation for the Rabi season as well as the agriculture sector.”

Gas curtailment is expected to continue till the end of October and further extensions could put more pressure on prices in coming weeks.

Published in The Express Tribune, September 29^th, 2010.