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Pakistan Fertilizer: Urea offtake clocked in at 2.87mn tons during 1H2019; up 5% YoY

• Urea offtake during 1H2019 depicted growth of 5% YoY to 2.87mn tons on the back of pre buying by dealers/farmers amid expected hike in urea prices as the Govt. was set to increase gas prices w.e.f. July 2019.
• Furthermore, timely rain fall across the country also pushed up volumetric sales of urea, as per our channel checks.
• Among local producers, EFERT witnessed significant decline of 10% YoY as in Jan 2018 the company carried inventory of 184k tons which came down to 10k tons in start of 2019.
• Similarly, Urea production during 1H2019 witnessed growth of 13% YoY due to resumption in production by FatimaFert and Agritech, contributing 393k tons cumulatively during 1H2019 vs. nil in 1H2018.
• Industry’s urea closing inventory for 1H2019 closed at 178k tons.
• Total DAP sales during 1H2019 declined by 16% YoY to 572k tons due to increase in DAP prices by over 20%. The largest fall of 55% YoY was seen in FFC to 83k tons, which was followed by FFBL -3% YoY to 202k tons. While, EFERT witness an accretion of 6% YoY in DAP volumes to 185k tons.
• Key risks to fertilizer sector include, 1) an unfavorable settlement of GIDC, 2) poor crop season, and 3) increase in gas prices above our expectations.