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Urea bags to get tagged at PkR 1,480 – Alfalah Securities Limited

Karachi: The Ministry of Industries and Production has directed fertilizer manufacturers to attach price tags of PkR 1,480 on every urea bag in order to discourage black marketing of urea which would allow farmers to acquire the product at an affordable price in the Rabi season.

According to Alfalah Securities, the government has also been successful in bringing down urea prices from PkR 1,580/bag to PkR 1,480/bag after the resumption of gas supplies to fertilizer plants on the SNGPL network and Engro Enven1.3 in particular. The government has taken steps to ensure sufficient urea availability in the Rabi season which would help farmers to cultivate wheat and gain from the recent support price increase of PkR 100 per 40-kg. At present, the demand of urea in the Rabi season stands at 3.4 mn tons while the local manufacturers would supply 2.7 mn tons of urea to the farming community from 2.4 mn tons production and 0.3 mn tons opening inventory. The government is making efforts to cater the demand-supply gap of 0.7 mn tons through importing urea and 0.2 mn tons urea would be procured till November end. While, the remaining 0.5 mn tons urea would be imported in December. The government has also allocated a subsidy of PkR 25 bn in order to bring the price of imported urea in line with the local prices.

Alfalah Securities expects the steps being taken by the government would result positively for the farming community as black marketing and hoarding of urea would decline while the income of farmers would also improve primarily due to an increase in wheat support prices and decrease in price of urea. Moreover, Alfalah Securities also expects a cut in urea prices would decrease the primary margins of fertilizer manufacturers in future yet there profitability would remain intact in CY11.

Market Outlook:
Sell on Strength.

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