LAHORE - The OGRA has approved the terms of agreement between Engro Fertilizers, Sui Northern Gas Pipelines and Mari Petroleum for the supply of gas at concessionary rate of $0.7/mmbtu to Engro Fertilizers (EFERT)’s EnVen plant. The relevant parties have now started working upon its implementation. Furthermore, ECC has also approved supply of 3mmcfd gas from Maru East field to the company, which is expected to enhance urea production by 14,000 tons.

As per the data released by National Fertilizer Development Centre (NFDC), total fertilizer offtake in Jan 2015 clocked in 9% YoY higher at 766k tons on the back of 167% YoY higher DAP sales (72k tons), while urea sales edged up by 2% YoY to a 6-year high of 629k tons. On a sequential basis, fertilizer offtake dropped by 25% MoM mainly due to seasonal factors, where DAP sales dropped by 67% MoM. Resultantly, Pak urea and DAP inventory as on Jan 2015 is estimated at 203k tons and 82k tons respectively.

Company-wise details of Jan 2015 urea offtake reveals an overall positive trend for major urea producers barring Engro Fertilizers, which reported urea offtake of 167k tons (-4% YoY and -9% MoM). On the other hand, FFC and Fatima witnessed sales of 232k tons (+20% YoY) and 39k tons (+52% YoY) respectively. Imported urea sales (by NFML) dropped by 16% YoY to settle at 187k tons, bringing local manufacturers market share to 70% in Jan-15 versus 64% in Jan-14. FFBL sold 28k tons of DAP in Jan-2015 (+126% YoY), while imported DAP sales jumped by 202% YoY to 44k tons.

The government has deferred gas tariff hike to Apr 2015 from Jan 2015, which is likely to test the ability of the local urea manufacturers to increase prices by up to Rs191/bag. FOB bulk China and FOB Prilled bulk Middle East prices hover around $290/ton and $330/ton respectively, translating into ex-Karachi price of Rs2050-2350/bag. Whereas locally produced Urea prices average at Rs1950/bag, a difference of only Rs100-400/bag.