Manager Research
Dec 03 - 09, 2007

National Fertilizer Development Centre released the data for the month of October. As the fertilizer companies work on calendar year hence we have compiled ten month statistics of the sector. Industry production and sale declined by 5% and 3% whereas the production and sale for the listed manufacturers declined by 1.5% and 7.6%. Urea off take declined by 7% while DAP off take surged by 5% to 3.62m and 959k tons respectively.

During the month of October, after announcement of subsidy on phosphates, DAP recorded an unprecedented off take of 381ktons during October 2006, with an increase of 47.8%, over the same period in 2005. Unfortunately this trend could not continue because of rapid increase in local and international prices of DAP. The increase in prices reverse the last year increasing trend during October 2007 i.e. a peak sowing season of wheat. The off take of DAP decreased by 46.8% over October 2006. Its off take was 202ktons during October 2007 as against 381ktons during October 2006. This trend increased the consumption of urea, from 173ktons in October 2006 to 225ktons in October 2007.


The average sale prices of AS and CAN fertilizer products reduced upto 3%. The prices of phosphatic and potassic fertilizers remain stable with slightly increase of 2-3%. On a m-o-m basis urea prices rose by 0.4% whereas DAP prices rose considerably by 2.2%. Urea prices reached Rs545/bag whereas Rs1,303/bag. International prices are also witnessed the same trend as Fob bulk Yuzhny urea price was quoted at US$320-345/ton against US$295-330/ton of previous month. Middle East bagged urea was set at US$330-350/ton. DAP price during October was referred at US$436-450/ton fob bulk in US Gulf, and US$450-470/ton in Jordan market. MAP, TSP and SOP prices remained at the level of US$440-460, 390-423 and 335-345/ton respectively.


Import of the fertilizer declined by 21% to 1,036ktons as against 1,319ktons in the same period last year. Urea imports dropped by 91% to 55ktons whereas DAP import surged by 67% to 897ktons. Imports of other product also reduced during the period.


Rabi 2007-08 started with an opening balance of 357ktons. Domestic production during Rabi is estimated at 2,394ktons and confirmed import so far in November and December 2007 is 50k tons and 100ktons. Thus total urea availability would be around 2,901ktons against estimated demands of 2,539ktons. The import requirements may be around 50-100ktons. DAP opening inventory was about 374ktons at start of Rabi. The lined up imports by private sector are 476ktons. Domestic production is estimated at 95ktons. Thus total availability of Rabi subject to materialization of imports would be 945ktons against the estimated demand of about 819ktons. Therefore, DAP demand/supply situation appears to be tight during January onward and needs periodical review due to subsidy element and increasing trend of prices at international level.


Going forward, if DAP prices continue to climb, the farmer may resume using more of urea in place of DAP owing to the rising differential between the prices of the two fertilizers. Consequently, we may see further YoY growth in urea off take in the last two months of the current year. On the other hand government might not allow this to happen and would pass on more subsidies to them as the government has long been projecting and trying to increase the yield per hectare.