Pakistan Fertilizer: Pricing confusion hit urea offtake in Jul’19, (AKD Daily Aug 28, 2019)
- Urea offtake for Jul’19 clocked in at 464K tons, down 28/7% MoM/YoY, taking cumulative 7MCY19 urea offtake to 3.3mn tons, up 2% YoY. The decline in Jul’19 urea offtake is accounted for by lack of clarity on Urea pricing and GIDC settlement issue, in our view.
- Company-wise, Urea offtake declined across the industry, except for EFERT, whose offtake remained flattish YoY as well as MoM. Urea offtakes of FFC and FFBL declined by 18/37% on YoY basis and, a more notable 33/62% on MoM basis, respectively. The Urea inventory closed at 374K tons, up 1.1/4.3x MoM/YoY.
- DAP offtake during the month, on the other hand, improved 28/6% MoM/YoY to 202K tons led by seasonality factor and potential price hikes during upcoming Rabi season, taking cumulative 7MCY19 DAP offtakes to 766K tons, flattish YoY. While DAP offtake improved sequentially across players, only FFBL fared better in 7MCY19 (38% YoY higher DAP offtake of 301K tons).
- The GoP has decided to introduce a presidential ordinance to settle 50% of GIDC receivable from gas consumers (~PKR40bn from Fertilizer sector). As per the proposal in Jan’19, prospective reduction in GIDC rates will be applicable for only those who clear 50% of the outstanding GIDC overdues. We await clarity in this regard before incorporating the same in our models.
AKD Research
Fauji Fertilizer is engaged in the manufacturing, purchasing and marketing of fertilizers including the investment in other fertilizer manufacturing operations. As of Dec 31 2004, Co. had a design capacity of 2,455,000 tonnes for urea production and 445,000 tonnes for DAP production.
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