EUR 3.54 For Business Accounts Only

Pakistan Fertilizer: Offtake recovers; weak dynamics to persist

• Nitrogen fertilizers carried healthy momentum in May’17 with Urea/CAN offtakes improving by 108%/82% YoY, which can be attributed to low base factor last year. To recall, offtakes during May’16 dried-up in anticipation of subsidy. 5MCY17 offtakes of Urea/CAN have risen to 1.64mn/0.26mn tons, up 32%/47% YoY.

• Phosphate fertilizers including DAP/NP faced declines of 35%/36% YoY on seasonal application of the Kharif crop and healthy offtakes in previous months. During 5MCY17, DAP offtake grew 16%YoY led by continuation of subsidy schemes and lower international prices.

• We believe overall growth in fertilizer offtakes is mostly attributable to (i) abnormally lower offtakes in the same period last year on subsidy anticipation and (ii) consistent subsidy policies. As of May’17 industry still holds 1.70mn tons of Urea inventory despite 2% YoY decline in production during 5MCY17.