KARACHI: Pakistan urea sales during Nov 2018 were down 21 percent year on year taking 11 month 2018 sales to 5.1 million tons, down one percent year on year.
Lower sales during outgoing month were due to early procurement by dealers and farmers amidst expectations of price hikes in Oct (Sept sales up 168 percent YoY) and delay in sowing season due to halt in start of sugarcane crushing by millers, said Shankar Talreja, analyst at Topline Securities.
He said some key risks were also posing ahead for the fertilizer industry that included decline in international urea prices, slower than expected urea sales, poor crop season, sharp hike in domestic gas price and rupee devaluation.
During Nov 2018, urea production is likely to increase by 22 percent YoY on back of the start of urea production by Fatima Fert and Agritech (contributing around 60-70k tons) and low base effect of EFERT’s production (145k tons in Nov 2018 against 119k tons in Nov 2017).
Closing inventory of urea during Nov 2018 is expected around 245k tons.
First shipment of 50,600 tons of imported urea arrived Pakistan last Sunday and further 50,000 tons will reach by this week.
Among companies, Fauji Fertilizer (FFC) and Fauji Fertilizer Bin Qasim (FFBL) are likely to post decline of 8.0 percent and 6.0 percent year on year respectively in urea sales during Nov 2018. Similarly, EFERT’s volumes would be down by two percent YoY, Talreja said.
“We maintain our market weight stance on fertilizer sector given possibility of further hike in gas tariff,” Talreja said. Further, government is more focused on improving farmers’ economics by reducing their cost of input (which is in-line with their manifesto). “Amid aforementioned reasons, we believe, margins of urea manufacturers could face headwinds in near term,” he said.