Urea off-take for August 2017 neared a million tons – highest ever for the month. It was just 0.34 million tons last month, lowest ever for July. Two month ago, it was at an all-time high for any month. Expectedly, the cumulative 8MCY17 urea off-take now stands just shy of 4 million tons – another all-time high. The previous 8M high was in 2009, a year which eventually recorded the highest every calendar year urea off-take.
Recall that ambiguity around the budget period had sent urea off-take in to a near halt, but clarity emerging thereafter seems to have normalized the off-take pattern. For the first time in seven year, Pakistan is in with a realistic chance of crossing 6 million tons for the full year. Although, all of it could change should prices go up again as feared.
International urea prices have slowly but surely started to pick up, having crossed $240 per ton as per latest reports. Recall that urea prices have stuck around $200/ton mark for quite a while, ensuring local prices stay in check, with the ever looming threat of cheap imports. Moreover, the inventory levels remained well over a million ton for much of CY17, maintaining pressure on prices and margins.
The 8MCY17 urea off-take is a healthy 26 percent higher year-on-year. DAP off-take has also been growing steadily, recording 16 percent year-on-year growth. The 8MCY17 off-take is also 12 percent higher than 5-year CAGR for the same period, suggesting things are looking up.
Recall that there was heavy anticipatory buying in June and continuation of subsidy had earlier played its role, as did the clearance of stock at discounted rates. Urea inventory levels have also come down considerably to around 0.5 million tons – lowest in two years. Lower inventory levels could well trigger a price war, and the local players could finally pass on the cost increase that they had absorbed around the budget period.
All this while, the phosphate fertilizer application has been heartening. The subsidy on DAP seems to be yielding better results than that on urea, as there is a visible and much-needed improvement in the NP application ratio. Improved and balanced fertilization should ideally result in improved farm yields, and better economy to enable farmers absorbs any price shock that may come in the future.
DAP of—take for 8MCY17 at 0.96 million tons is a massive improvement from the 5-year CAGR of half a million tons. This is easily the best performing 8M calendar year period in traceable history, and subsidy and low international prices have both played their part.