KARACHI – Higher fertiliser prices and enhanced gas curtailment, during January, has reduced total fertiliser off-take by an annual 22 percent. According to data, released by the National Fertiliser Development Centre, off-take stood at 540,000 tonnes. DAP off-take dwindled an annual 36 percent in January and reached 59,000 tonnes.
This was triggered by high DAP prices and enhanced gas curtailment at FFBL’s plant. FFBL’s DAP plant has been shut since January 13, 2010. Despite the complete shut down for half the month, FFBL was able to register production of 25,000 tonnes against an off-take of 29,000 tonnes in January. Engro’s off-take, on the other hand, stood at 25,000 tonnes as the company imported 26,000 tonnes of DAP in January.
Urea sales also fell by around 12 to 20 percent as a result of gas supply reduction. The off-take registered an annual 28 percent decline and reached 394,000 tonnes. With regards to major fertiliser manufacturers, FFC’s and Engro’s urea off-take curbed by an annual six percent and seven percent respectively in January, while FFBL’s urea plant remained shut since December 26, 2010.
The government announced a detailed gas load-shedding plan for the fertiliser sector in December, which meant a 20 percent gas supply curtailment on the Sui network and 12 percent on the Mari network; in addition to a 45-days gas supply shutdown for all plants on Sui in the first quarter.
Consequently, more than half of industry’s urea capacity was idle in January, 11. Urea production declined by an annual eight percent (excluding Fatima which was not operating in Jan-10, urea sales would have actually been an annual 21 percent lower). Likewise, Pak DAP production fell by an annual 46 percent in Jan-11. Recent channel checks suggest that plants have re-started operations from mid-Feb onwards, as gas supply has been restored post 45-days shutdown.
Despite an unexciting start to the year, it is anticipated that some factors including higher urea margins, a 23 percent price hike effective from Jan-11, will more than compensate for lower production, while recovery in farm income on account of higher output prices will buffer demand of urea – post devastating floods in 2010.
On the DAP front, demand (+2 percent annual in 2011E and in-line with a five year average demand) will remain unexciting, given rising prices and Pak farmers price sensitivity on the phosphate front, said Farrah Marwat at KASB. She further said that, in the near term, strong primary margins on DAP are anticipated as civil unrest in the MENA region is choking the already tight global phosphate supply and pushing up prices, while acid costs have stayed fixed.
