Urea offtake surges 81pc YoY in June

LAHORE: The offtake of urea increased 4.9pc on a monthly basis and 81pc on a yearly basis to 1.16 million metric tonnes (MT) in June 2020, according to data released by the National Fertiliser Development Centre (NFDC).

The sequential increase in June offtake came as the farmers had delayed purchases in the previous month (May) in anticipation of a subsidy on urea and DAP. However, the government later decided to offer subsidies on DAP only, and that too in the Rabi season.

Ailia Naeem, a senior research analyst at AKD Securities Ltd, noted that the Budget 2020-21 aimed at widening the tax bracket by disallowing 20pc of the expenses to industrial undertakings in case of sales to unregistered dealers (initially with effect from July 2020), which also led to pre-buying of urea in June.

The government later decreased the rate of expenses (to 10pc) and delayed the implementation until October 2020.

She said that on a cumulative basis, urea offtake declined 7pc YoY to 2.6 million tonnes in the first half of CY20, courtesy Engro Fertilizers Limited’s flattish urea offtake, in addition to inoperational LNG plants.

“Higher offtake has led the urea inventory to decline 63pc MoM to 414,000 tonnes as of June-end. The provision of LNG to Fatima Fertilizer and Agritech in August to October may keep the inventory at or above these levels,” Naeem opined.

DAP OFFTAKE ON THE RISE

Meanwhile, the offtake of DAP in June 2020 clocked in at 175,000 tonnes, up 2.9pc MoM and 26pc YoY. This was due to low base effect in May this year, where EFERT remained at the forefront.

The cumulative offtake of DAP during 1HCY20 remained flattish at 598,000 tonnes.

Fauji Fertilizer Bin Qasim Limited (FFBL) remained the only player posting growth in DAP offtake (up 24pc YoY in 1HCY20). On a cumulative basis, EFERT and FFC witnessed 39pc and 51pc YoY decline, respectively.

Naeem shared that the overall DAP inventory clocked in at 473,000 tonnes. FFBL formed 44pc of the total DAP inventory and would likely witness an uptick in offtakes post-subsidy materialization.

She opined that lower oil prices may keep gas prices in check during FY21 (except for one-time gas price increase that has been delayed since January this year), which is another positive for the DAP producer.