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Flash Note: Pakistan Fertilizer: May 2018 Urea sales estimated at 480k tons, down by 8% YoY

• Prevailing water shortage of around 40% (as reported) coupled with pre-season stock accumulation by dealers/farmers in anticipation of rise in urea price led to Urea sales of 480k tons, down by 8% YoY, taking five months Urea sales to 2.1mn tons, up by 28%.
• Among players, Fauji Fertilizer (FFC) and Fauji Fertilizer Bin Qasim (FFBL) is expected to outperform the industry by posting growth of 14% YoY each in their Urea offtake, clocking in at 254k and 60k tons respectively. However, Engro Fertilizer (EFERT) is likely to show decline of 4% YoY to 134k tons.
• Total production during May 2018 is expected to post decline of 23% YoY to 420k tons due to 1) closure of Engro’s Enven plant for about a half month, capping its May 2018 production to around 100k tons, down by 40% YoY, and 2) higher RLNG prices and disrupted gas supply to Agritech and FatimaFert, resulting in suspension of their production for last 9-11 months.
• Urea inventory during May 2018 is estimated to hover around 380k tons vs. 434k tons in Apr 2018.
• During May 2018, Urea prices went up by Rs100 per bag to Rs1500 per bag as government eliminated cash subsidy of the same amount in FY18-19 budget.
• To note, there are further chances of rise in urea prices by Rs60-100 per bag post July 2018 as manufacturers are expected to withdraw their cash subsidy contribution of Rs106 per bag.
• On the other hand, DAP prices went up by ~2.5% MoM to around 3,220 per bag due to gradual pass on of currency devaluation and increase in prices of phosphoric