By: Shajar Capital Pakistan Private Limited
Fertilizer: As per the latest data released by NFDC, urea offtakes improved 28%YoY/35%MoM to 839k tons in Dec’15 which was the after effect of hefty dealer discounts (PkR120‐130/bag). DAP offtakes diminished 40%YoY/75%MoM to 132k tons as offtakes up scaled in Oct-Nov’15.
Therefore, cumulative urea sales during CY15 stands at 5.6mn tons(local up 3%, imported down 18%Yoy) as FFC and EFERT managed to achieve meager volumetric growth of 2% and 3% respectively. The subdued sales during CY15 is mainly attributable to feebler agri-economics alongside the uncertainty in urea prices.
DAP sales enrolled an uptick of 8%YoY to 1.7mn tons with the charge originating from FFBL (+15%YoY). This growth is for the most part by virtue of phosphatic subsidy announced by the government under the kissan package.
We have belief urea manufacturers would extend prevailing discounts till the end 1HCY16, hence margins are bound to remain compressed. Our premise is based on 1) the current ex‐factory Urea prices close to PkR1924/bag in contrast to international urea price of PkR1802/bag (US$234/ton) 2) Dec’15 ending inventory of 559k tons (+2.7xYoY).