Urea sales likely to surge 36pc in July on low base, higher demand

KARACHI: Urea sales in July are likely to rise 36 percent year-on-year to 630,000 tonnes, boosted by a low base effect and higher demand from farmers, a brokerage reported on Friday.

Brokerage Topline Securities said urea sales in July are likely to increase 3 percent month-on-month, taking the cumulative sales in the first seven months of 2023 to 3.7 million tonnes, up 1 percent year-on-year.

The brokerage attributed the strong growth in urea sales to a low base of last year, when sales were affected by Eid holidays and higher rainfall across the country. It also said that higher crop prices and government subsidies supported the demand for urea in July. The closing inventory of urea was estimated at 174,000 tonnes in July, down from 215,000 tonnes in June, indicating a comfortable supply situation.

Among the companies, Engro Fertilizer was likely to record the highest urea offtake of 266,000 tonnes in July, followed by Fauji Fertilizer Company with 214,000 tonnes, Fatima Group with 92,000 tonnes, and Fauji Fertilizers Bin Qasim with 24,000 tonnes.

Topline data also showed that di-ammonium phosphate (DAP) sales in July jumped 71 percent year-on-year to 115,000 tonnes, mainly due to the same reasons as urea. However, DAP sales declined 27 percent month-on-month in July due to seasonal factors.

Company-wise data suggested that FFBL and Engro Fertilizer were likely to record DAP sales of 72,000 tonnes and 26,000 tonnes respectively in July, followed by Fauji Fertilizer Company with 13,000 tonnes.

The closing inventory of DAP was likely to be around 235,000 tonnes in July, compared to 275,000 tonnes in June.

Meanwhile, the fertilizer review committee (FRC), a body that monitors the availability and prices of fertilizers, warned in its recent meeting that the country could face shortfall of urea in the ongoing Kharif season, as well as the upcoming Rabi season. The FRC attributed the urea shortage to the low domestic production capacity, which is hampered by the insufficient supply of natural gas to the fertilizer industry. Natural gas accounts for 70 to 80 percent of the cost of urea production.

The price of urea, which was around Rs. 2,600 per 50-kilogram bag at the start of the Kharif season, now stands at about Rs. 3,000. However, it is difficult to obtain the farm input at the official price. Instead, the nutrient is being sold at up to Rs. 3,300 per bag in Punjab and Rs. 3,700 to Rs. 4,000 in Sindh and Balochistan. Farmers in Khyber Pakhtunkhwa have also complained about the urea price hike.

As per estimates, there will be a shortage of 0.2 to 0.6 million tonnes of urea by the end of the Rabi season of 2023-24. Manufacturing plants in Punjab used to face a shortfall of natural gas. However, now bigger plants in Sindh are dealing with low pressure and curtailed supplies, severely affecting the output of the essential farm nutrient.

Punjab’s projection for the ongoing Kharif season stands at 2.35 million tonnes for urea and 0.8 million tonnes for DAP. Punjab has to bear about 16 percent low urea availability in June. Overall, farmers in Punjab are getting 13 percent less urea in the current season.