Urea offtake dips 6pc in July

Urea offtake for the industry in July clocked in at 465,000 tonnes, down 6pc on a yearly basis.

The decline in offtake is possibly due to pre-buying in June amid anticipation of an increase in Urea prices post the hike in gas prices.

On a cumulative basis, Urea offtake increased by 4pc on a yearly basis to 3.4 million tonnes for the seven months of 2019; offtake for Engro Fertilizer Limited (EFERT), Fauji Fertilizer Company (FFC) and Fauji Fertilizer Bin Qasim Limited (FFBL) declined by 8pc, 6pc and 20pc respectively.

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The incumbents witnessed market share attrition as imports and LNG-based manufacturers together reached 13pc (430,000 tonnes) of market share during the seven months of 2019.

The ending inventory levels clocked in at 382,000 tonnes, up 4.4pc YoY. The increase in inventory levels was supported by 76,000 tonnes of production from LNG-based producers, and 100,000 tonnes of urea imports.

DAP offtake in July 2019 declined to 202,000 tonnes, down 33pc on a yearly basis. On a cumulative basis, DAP offtake declined to 14pc to 848,000 tonnes in the seven months of 2019, mainly due to the significant rise in DAP prices amid PKR depreciation. Inventory levels stood at 412,000 tonnes, up 15pc. FFBL and FFC together held 72pc of the inventory.

Given the LNG-based production of 700,000 tonnes (assuming smooth operations of these plants) till Oct 2019, urea availability this year is likely to reach 6.3 million tonnes.

Assuming the urea demand remains stable at 5.8 million tonnes, closing urea inventory will reach 0.5 million tonnes, which is unlikely to create major supply concerns. However, continued operations of these LNG-based plants beyond Oct may start building up pressure on urea prices.

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