KARACHI: On the back of expected increase in demand in the upcoming Kharif sowing season amid low inventory, Fauji Fertiliser Company has increased urea prices.
“As per our channel checks, Fauji Fertiliser Company has increased urea prices by Rs80 to Rs1,820 per bag,” said AKD Securities. “The price increase comes on the back of expected pickup in demand in the upcoming Kharif season amid low inventory levels.”
As per January 2019 data, there is only 70,000 tons in urea inventory, according to the brokerage house. Engro Fertilisers, Fatima Fertiliser and Agritech Limited are looking at market reaction to the price hike by the Fauji group before taking any decision, according to an industry official. Fauji Fertiliser increased the urea price by Rs80 to Rs1,792, but the retail price in markets was Rs1,820 as distributors were taking advantage of the gap between supply and demand, according to Topline Securities’ analyst Shankar Talreja.
The absence of sufficient urea supply in the market has broadened the gap between demand and supply as some plants were shut down in January and February for annual maintenance. “Tight supply has resulted in increase in urea prices,” said AKD Securities’ analyst Aila Naeem. “The demand and supply situation is in favour of fertiliser players,” Naeem added. The company increased the price primarily due to inflationary pressure, Talreja pointed out, adding that the rupee depreciation and rise in prices of raw material had increased overall cost of the company.
The second reason for the price hike was the expected increase in gas prices from July 2019, he said. Gas infrastructure development cess (GIDC) had been an issue between the government and the industry, said the AKD Securities’ analyst, adding that fertiliser players claimed that they had been absorbing 90% of GIDC impact.
The government has hinted at waiving 50% of the cess on the fertiliser industry on the condition that it will reduce fertiliser prices by Rs200 per bag.
Published in The Express Tribune, March 20th, 2019.