Pakistan Fertilizers Urea inventory normalizes for the time-being , (AKD Daily, Jan 24, 2020)
AKD Daily
Pakistan Fertilizers Urea inventory normalizes for the time-being
- As per data released by NFDC, Urea offtake increased by 89/253% YoY/MoM to 1.35mn tons in Dec’19, due to pre-buying in anticipation of increase in urea price in upcoming months. This takes CY19 urea offtake to 6.2mn tons, up 7% YoY, solely led by LNG based fertilizer players.
- On cumulative basis, FFC, FFBL and FATIMA witnessed a decline of 3/10/25% in CY19, while EFERT’s urea offtake remained flattish. The ending urea inventory has normalized to 203K tons in Dec’19. However, diversion of excess LNG availability to Fertilizer sector in CY20 may keep urea inventory levels above 400-500K tons.
- DAP inventory has also been on an incline (492K tons as of Dec’19) due to weak offtake (down 12% YoY in CY19) amid stable production levels. Only FFBL’s offtake increased by 10% YoY in CY19, with EFERT/FFC/FATIMA posting a decline of 21/48/12% YoY.
- The Fertilizer players have reportedly expressed their inability to pass on the GIDC benefit to farmers due to potential gas price hike in the offing. Given increase in ‘fuel’ prices only to LNG price level (PkR150/bag impact), we highlight the GoP will be forsaking PkR35bn in revenues as compared to the OGRA approved gas price hike. Meanwhile, the urea demand supply dynamics will continue to determine prices.
- Until further clarity emerges, we advise investors to remain cautious in the sector. ENGRO should be accumulated on dips due to (i) exposure to diversified businesses and (ii) unutilized cash, where investments in lucratively profitable ventures could be key upside trigger.
Fauji Fertilizer Bin Qasim Limited is a Pakistan-based holding company. The Company manufactures, purchases and markets fertilizers. It is involved in meat, dairy and coal based energy generation sectors. It has identified its potential business segments and has undertaken investments in the areas of food, financial, power sector and wind energy projects. Its products include Granular Urea, such as Sona Urea, and Di Ammonium Phosphate (DAP), such as Sona DAP. Sona Urea is a synthetic organic compound containing nitrogen in amide form available in the form of white solid prills. It is applied to soil and also suitable in solution form as spray application. Sona DAP contains nutrient element, phosphorous besides nitrogen available in flowing granular form Granules are stronger, harder and of uniform size. It is suitable for various crops and soils recommended for initial application. It produces over 791,260 metric tons (MT) of DAP and approximately 433,610 MT of Urea.
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