Latest monthly figures released by the National Fertilizer Development Centre (NFDC) reveal a healthy five percent increase in urea off-take for Rabi season against the previous one. This is the first time in over three years, that urea off-take for a full crop season has shown positive growth.
Lower urea price in local market and improved farmers’ economy contributed to the increased off-take during the period. Urea price in the local market is down to Rs 1,725 per bag, from as high as Rs 1,800 per bag in March last year. The differential between local and imported urea price has also narrowed down considerably, allowing local manufacturers to get rid of inventories.
Urea production in March 2013 at 0.39 million tons was the highest in 12 months, indicating that if local manufactures are provided with enough feedstock gas, the prices would remain in check. On a worrying note, the urea inventory has come down to only 0.2 million tons as against nearly a million tons of inventory in March last year.
The government will have to arrange for quick urea imports in the near future, as Kharif season takes full swing from June onwards. Little suggests a major shuffle in gas allocation priority, which is likely to result in more urea import and stiff price competition.
Urea prices on the international market have softened of late, which could put extra pressure on local manufactures’ margins, as feedstock gas prices are expected to witness an increase come July.
While the manufacturers may be fighting for margins, it is good news on agriculture front as urea off-take is expected to be healthy owing to the abovementioned factors.
Two of three leading political parties, PML-N and PTI have promised a change in gas allocation policy. Should the setup in Islamabad change hands and the winning party stays true to its words, it might be good news for fertilizer manufactures as industry sits second on the gas allocation priority list.