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Urea offtake drops by 4 percent in first seven months of current year


KARACHI: Pakistan’s urea offtake including local and imported declined by 4 percent to 3.15 million tones in seven months of 2014 (January –July) as compared to 3.17 million tones in the same period of 2013, said National Fertilizer Development Centre (NFDC).
Only in the month of July 2014, the urea offtake registered a decline of 5 percent Month on Month (MoM) basis to 487000 tones as against 512000 tones in month of June 2014, with local manufacturers, witnessing a decline in their offtake levels, whileincrease was witnessed in imported Urea offtake which posted a significant jump of 3x to 67000 tones in July 2014.
On the other hand, Di Ammonium Phosphate (DAP) offtake registered a significant increase of 1.4x MoM, clocking in at 145000 tones.
This substantial growth is due to lower base effect as announcement of subsidy of
Rs 400/bag in FiscalYear2014-15 (FY15) budget restricted the purchases during June’ 2014, Taurus Research analyst said.   
A three bench tribunal comprised of Supreme Court  judges declared imposition of Gas Infrastructure Development Cess (GIDC) unconstitutional and stated to refund the amount in a reasonable time which has been collected so far. Though, the likelihood of GIDC refund are pretty much low, but the said cash inflow would result in a significant jump in the cash flows of the companies if received, the analyst added.
On the other side, we opine that, GIDC has become a key source of federal revenue (0.6 percent of Gross Domestic Product), absence of which will make achieving FY15’s fiscal deficit of 5 percent nearly impossible. Thus, we expect a similar tax collection head to continue, he said.
Owing to higher inventory levels of imported urea of 422000 tones at the end of June 20 14, imported supplies of urea remained nil, however DAP imports clocked in at 76000 tones, respectively.
Fatima remained the only local urea manufacturer which managed to show decent urea sales in July 2014 and registered an increase of 8 percent MoM to 49000 tones, while Fauji Fertiliser Bin Qasim Limited (FFBL) recorded a sharp decline of 34 percent MoM, followed by Engro Fertiliser and Fauji Fertiliser Company (FFC) which posted a dip of 20 percent MoM (155000 tones) and 16 percent MoM (189000 tones), respectively is pertinent to mention that, decline in offtake levels of urea is attributable to higher sales volumes of imported urea which were up by 3x to 67000 tones.
Moreover, market share of imported urea also augmented to 14 percent in July 2014 as compared to a mere 3 percent in June 2014.
On the other side, FFBL has remained relatively active on the DAP front, selling 59000 tones (up 72percent MoM) of DAP in June 2014 compared with 41000 tones in June 2014. While, Engro reported a massive turn around and sold 59000 tones (5.5x higher MoM) compared with a paltry 9000 tones in June 2014, respectively.
DAP offtake registered a significant increase of 1.4x MoM, clocking in at 145000 tones. This substantial growth is likely due to lower base effect as announcement of subsidy of Rs 400/bag in FY15 budget restricted the purchases during June’ 2014 in anticipation of decline in prices.

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