Karachi: Feb’12 fertilizer off-take turned out to be subdued, as expected, where urea off-take dipped by 61%YoY to just 160k tons while DAP off-take declined by 83%YoY to 12k tons.
According to AKD Securities, MoM change in fertilizer off-take followed the above trend where urea and DAP off-take were down by 73.8%MoM and 60.2%MoM, respectively. 2MCY12 urea off-take came in at a reasonable 770k tons, down by 4.6%YoY while 2MCY12 DAP off-take showed a grim picture with massive decline of 68.2%YoY to 40.7k tons. Decrease in fertilizer off-take is attributed to already high urea availability and farmer’s poor economic conditions where purchasing power has been badly hit by rising fuel and fertilizer prices coupled with depressed cotton prices (cotton prices lower by 51%YoY in Feb’12).
Urea import for FY12TD has touched 1,318 k tons. AKD Securities anticipates that FY12 urea imports will surpass the import of 1,656k tons in FY10. At the end of Feb12, ending inventory of urea has reached significantly high levels of 516k tons, ~1 month urea requirement. On imported urea side, ending inventory was counted at 278.2k tons, with 255k tons of urea still scheduled to be imported in Mar’12, as per NFDC estimate.
Urea Manufacturers – tough going in Feb’12: It was another difficult month for urea manufacturers, hit by lower demand as well as gas curtailment. Below AKD Securities has briefly described the performance of major fertilizer companies:
FFC- FF0 also felt the pinch of in Feb’12, selling only 62k tons. However FFC sales still comprised a sizable 684% of branded urea sales.
FFBL- Depressed product demand coupled with plant closure on account of gas curtailment combined to hurt FFBL sales as the company was unable to sell urea (zero availability) while DAP sales were recorded at just 1.5k tons, with a carryover DAP inventory of 24.5k tons.
Engro – With the Enven plant closed coupled with lower demand environment, ENGRO sold only 17k tons of urea (-76%YoY) in Feb’12, while DAP sales were also depressed (-86%YoY to 3.6k tons)
FATIMA – Just managed to sell 9k tons of urea, down by a concerning 83%YoY. NP off-take figures also remained depressing at 7.9k tons while the company managed to sell only 0.6k tons of CAN.
Outlook of Fertilizer Off-take: AKD Securities expects slight pickup in urea sales in Mar’12; however off-take is still expected to lag historical levels. Demand should pick up towards the end of Apr’12 as imported urea is slowly consumed and demand picks up in anticipation of Kharif plantings. CAN off-take is forecasted to kick off by Jun’12 when cotton sowing season will start. As 1Q is traditionally slow for phosphate fertilizer, where AKD Securities anticipates sequential improvement in DAP and NP off-takes, going forward.