If December has not acted up, the fertilizer industry is all set to post its highest ever urea production in the country's history. That is what the 11MCY19 numbers tell – as urea production is clear by 12 percent from the same period last year, all set to go past six million tons for the calendar year. That is about it as far as heartening stuff about fertilizer is concerned.

Pakistan would not mind had the six million tons of likely production was met with six million tons of off-take as well. But that is not happening – unless December produces a record month of well over a million tons of urea off-take alone. The urea off-take for 11MCY19 at 4.9 million tons is lowest in three years, which does go on to show some crop targets will surely be missed, and some crops will be delayed, as the reports are emerging.

The Rabi season has started at a rather slow note, with the first two months showing the lowest off-take in recallable memory, or at least since CY10, at half a million tons. Yes, urea prices have increased in the same period, but it has been more of a gradual increase since the beginning of the fiscal year. The slowdown in demand seems to be driven more by crop situations than solely by prices.

Not that DAP application has got any better. In fact at 1.8 million tons, it has recorded the lowest 11M off-take since CY15. All this while, the NP ratio has also taken a hit, soaring to 2.65, worst in four years. DAP prices have sure played a role, having increased by 10 percent over last year, but the damage seems to have been done more by the higher urea prices, which have gone up by 20 percent over last year. The latest increase after the GIDC fiasco has also slowed down the off-take.

In all likelihood, the full year urea off-take is once again going to fall way short of the ever elusive 6 million tons. The spending meanwhile, has gone beyond Rs300 billion for 11MCY19, up by 7 percent year-on-year, despite 6 percent lower fertilizer off-take. Urea spending at Rs183 billion is easily the highest ever for 11M – and that partly explains why DAP off-take has suffered more than urea.

Fertilizer inventories are high, which could mean pressure on the pricing power going forward, especially as feedstock gas prices undergo a likely revision come January 2020.