ISLAMABAD: Fertilizer offtakes in Pakistan saw contrasting trends in October 2024, with urea demand experiencing a significant 22% year-on-year (YoY) decline, while diammonium phosphate (DAP) saw a sharp recovery, up 95% YoY, primarily driven by increased buying ahead of the Rabi wheat cultivation season.
The National Fertilizer Development Centre (NFDC) reported urea offtakes for October 2024 at approximately 358,000 MT, compared to 459,000 MT in the same month last year. Despite the drop in urea offtake, urea production rose by 10% YoY, reaching a total of 590,000 MT, which helped build up industry-wide inventory levels to the highest point since May 2020. Urea closing inventory for October reached 841,000 MT, marking a 5.4-fold increase from last year.
The decrease in urea demand was more pronounced for Engro Fertilizers (EFERT), where offtakes dropped by 42% YoY, totaling 99,500 MT. In contrast, Fauji Fertilizer Company (FFC) and Fauji Fertilizer Bin Qasim (FFBL) showed more stability, with their combined urea offtakes remaining flat YoY at 179,000 MT. However, despite these mixed results, their 10-month cumulative (10MCY24) urea offtakes showed an overall increase of 6.5% YoY to 2.5 million MT, while the industry total dropped by 8.8% YoY.
The significant inventory buildup suggests a slower-than-expected consumption of urea during the month. This higher-than-expected stockpile may also signal weak demand across the agricultural sector, likely affected by the reduced planting of cotton this season. FFC and FFBL combined held around 20% of the industry’s closing urea stock, while EFERT accounted for a larger share of 36%.
On a more positive note, DAP offtakes surged by 95% YoY to 309,000 MT, a dramatic rebound from the 159,000 MT seen in October 2023. The increase was driven primarily by bulk buying ahead of the wheat planting season. FFC and FFBL collectively recorded 155,000 MT of DAP sales, up 70% YoY, while EFERT saw an even sharper rise, with DAP offtakes reaching 49,000 MT, a 90% YoY increase.
Looking ahead, fertilizer demand is expected to see a seasonal uptick in November 2024, driven by the start of the Rabi wheat cultivation season. However, the overall demand may remain subdued due to weaker-than-expected agricultural returns, particularly from cotton, which has seen a substantial production decline. This could limit the potential for strong fertilizer sales in the coming months.
Given the mixed performance of the sector and the expectation of strained demand, analysts maintain a neutral outlook on FFC and EFERT.
