Karachi: Urea shortages in Pakistan and India to benefit fertilizer companies…
According to Standard Capital’s Securities, Pakistan has been suffering from urea shortages, which has already led to the prices of the fertilizer to increase manifolds. However, this increase in price is not the end of Standard Capital’s urea crisis. In fact the sowing of the Rabi season in Pakistan would begin in December which is expected to result in a further short fall of 10lacs‐12lacs tons of urea as the production of the SNGPL network plants has been disturbed owing to gas curtailments.
Furthermore, this acute shortage of the nitrogenous fertilizer would result in prices reaching sky high in December to around 2500per 50kg bag. This hike in prices would benefit the entire fertilizer sector, especially bringing relief to the SNGPL network plants who are already suffering from underproduction of urea on account of gas curbing.
The increase in prices would be accompanied by an international rise in prices of fertilizer as our neighbouring country; India is facing severe shortage of urea which will escalate the demand of the nitrogen fertilizer hence resulting in augmented prices.
As per a newspaper farmers in India are facing the unique problem of fertilizer shortages despite abundant rains this year. These shortages have hit agricultural sector by means of skyrocketed prices and likely imports to cover up the total demand/supply gap.
Urea consumption forms 50% part of the total fertilizer consumption in India which will is expected to experience continuous augmentation because as population increases agricultural activities increase simultaneously. Despite of the current Urea production capacity of 20mn tons, India is to import 6 ‐ 7mn tons per annum due to high demand of urea and supply shortages. Apart from Urea, India also imports 6mn tons DAP per annum, to fulfil the growing demand of fertilizers.
Pakistan is not the only country facing the problem of augmenting prices as the Indian market, after the decontrol policy of commodity prices, is also facing the price increase of more than a double to Rs19,000 per ton DAP and like all dealers do, taking the benefit of hoarding and dragging this price to Rs24,000 per ton .
Standard Capitals continues to maintain its overweight stance on the fertilizer sector with particular emphasis on Fauji Fertilizer Company (FFC), Fauji Fertilizer Bin Qasim (FFBL).