KARACHI: Urea sales sharply fell 21 percent year-on-year to 477,000 tons in November as dealers and farmers stocked up on inventory amid price hike expectation, a brokerage reported on Wednesday.
Urea sales stood at 602,000 tons in the corresponding month a year earlier.
Analyst Shankar Talreja at Topline Securities said lower sales during the month were due to early procurement by dealers and farmers amid expectations of price hikes in October and delay in sowing season due to halt in start of sugarcane crushing by millers. Last month, urea sales, however, increased three percent from 465,000 tons in October.
In September, urea sales rose staggering 168 percent year-on-year.
In November, closing inventory of urea is expected at around 245,000 tons. First shipment of 50,600 tons of imported urea arrived last Sunday and another 50,000 tons are expected to reach by the ongoing week.
The Economic Coordination Committee of the cabinet in September allowed 100,000 tons of urea import.
Also Read: ECC allows import of 50,000 tonnes of urea
The government would subsidise Rs960 to keep imported urea price at low level. Local urea price currently stands at 1,615/bag and imported urea will cost Rs2,575/bag.
In November, urea production is expected to have increased 22 percent year-on-year on back of the start of urea production by Fatima Fertilizer and Agritech and low base effect of Engro Fertilizer’s production – 145,000 tons in November versus 119,000 tons in the corresponding month a year earlier.
Urea demand in the country currently stands at 5.833 million tons compared to 5.862 million tons a year ago. Urea sales were recorded at 5.1 million tons, down one percent in the first 11 months of the current fiscal year of 2018/19.
In November, Fauji Fertilizer Company and Fauji Fertilizer Bin Qasim saw eight and six percent year-on-year decline in urea sales. Engro Fertilizer’s volume would be down two percent in the last month over October.
“We maintain our market weight stance on fertiliser sector given possibility of further hike in gas tariff,” Talreja added. “Government is more focused on improving farmers’ economics by reducing their cost of input. We believe that margins of urea manufacturers could face headwinds in near term.”
Key risks to fertiliser industry include decline in international urea prices, slower than expected urea sales, poor crop season, sharp hike in domestic gas price, and rupee devaluation.
(This news/article originally appeared in The News on December 6th, 2018)