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Urea off-take in February registered a 5-year low. Couple it with January urea off-take, and the 2MCY17 number is at a 13-year low. That said, it is not necessarily a worrying sign, as it comes at the back of heavy buying in the dying months of CY16, making up for most of the sluggish Rabi crop season off-take.

All eyes are now on the upcoming Kharif season, as March usually does not see high urea off-take. There are reports that the Kharif season sowing may get delayed in some key areas, which could have a toll on urea buying as the season begins. Recall that urea off-take has consistently declined in the past five years for one reason or another – indicative of the sensitive farmers’ economy.

So far the signs are encouraging in terms of agri output, and urea should see demand pick up once Kharif crops get in full swing. The best part in the whole scenario is that the price uncertainty that persisted for much of last year seems to have vanished, at least for now. There should be less anticipatory buying this year than there was last year.

Urea prices have been stabilized post government intervention through subsidy. A 27 percent year-on-year decline for February tells how much more accessible has the commodity become. That the off-take fails to grow by as much tells the very nature of fertilizer demand and farm economics. In all likelihood, the government would want to extend the cash subsidy on urea for another year, with the general elections round the corner.

International urea prices have gone up way beyond $230 per ton – and that should offer a cushion to the local manufacturers. Recall that international prices had slid down to as low as $200 per ton, compelling local players to sell at discount faced with pressure. Gas supply situation has visibly approved, ever since the induction of LNG in the system, and maintaining margins should be easier this year than it was last year.

The inventories still sit at over a million tons which could be a cause of concern, as demand has struggled to keep pace. That said, the pricing power of the local manufacturers so sternly tested last year, may not undergo as stern a test this year, thanks to better international prices.