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Fertiliser sales up 38pc in Nov YoY

Urea prices up Rs190/bag on gas curtailment
Gas supply to fertilizer cos to be suspended for 45-day

Aamir Abidi
KARACHI: Fertiliser offtake depicted a surge of 37.8 cent YoY in November 2010 to 1.21 million tonnes compared with 877k tonnes in same period last year mainly due to dealers pileup inventories on expectation of RGST on fertiliser, and growing demand of farmers as water recede, revealed the recent data of National Fertilizer Development Centre (NDFC).
According to the latest fertiliser data, urea sales significantly rose by 75.6 per cent to 879k tonnes against 501k tonnes of identical period last year. On the other hand, Di-ammonium phosphate (DAP) offtake remained on lower side as its offtake witnessed fall by 36.1 per cent on a YOY basis.
DAP sales remained at 180k tonnes compared with 282k tonnes in November 2009. Average retail prices of urea were recorded at Rs867 per bag, showing surge of 1.6 per cent MoM against price of Rs 853 per bag recorded in October 2010.

However, average retail price of DAP during November 2010 stood at Rs3085 per bag compared to Rs2713 per bag during September 2010 — an increase of 12.1 per cent in MoM. On the other hand, cumulative offtake of urea decreased 1.2 per cent to 5.49 million tonnes in 11MCY10 compared with 5.56 million tonnes in 11MCY09.While DAP sales down 18.7 per cent at 1.23 million tonnes against 1.51 million tonnes in 11MCY09 mainly due to higher average prices. Meanwhile, gas supply to Sui network plants is likely to remain suspended for 45 days from the January 7th as part of the gas load-management programme. Extended gas curtailment during winter (45 days scheduled outages) is a major concern for fertiliser players, whereas outages are expected to get back to the originally announced levels, which is 20 per cent on Sui network and 12 per cent on Mari network. To recollect, urea price per bag was increased by Rs75/bag across-the-board to cater for originally notified curtailment level, which was later reverted to Rs830/bag since actual curtailment was lower than notified. In a recent instance, Engro has increased its urea prices by Rs190/bag, which appeared unprecedented in nature and somewhat above industry expectations. As per the research analyst of InvestCap, gas curtailment is an ongoing issue, our discussion with industry sources reveals that other players, including FFC, have not yet increased their prices.
He said Engro is passing through crucial time as its plant is in start-up phase and trial production is expected to start by the beginning of next year, if all goes well. The delay in commissioning has also resulted in cost overruns for the project, to the tune of $10 million a month.
In this manner, recent increase in urea prices is expected to address liquidity concerns of the company amid cost overruns and gas curtailment.On the other hand, such an increase by FFC will have a noticeable impact, since urea business is the biggest contributor to its bottom-Online.


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