Local Fertiliser Industries slashes fertiliser prices to compete Imported Urea
KARACHI: The local fertilizer companies have slashed retail prices of urea by up to Rs 100 per 50 kg bag to compete with the state-run fertiliser firms.
Recently, Economic Coordination Committee (ECC) of the Cabinet approved the sale of imported urea available at the NFML at Rs 1310 per 50 kg bag on the recommendations of Finance Ministry. National Fertiliser Marketing Limited (NFML), state-run fertilizer, imported urea stock in this regard.
As per industry sources, Fatima Fertilizer Company Limited (FFCL) & Pakarab Fertilisers Limited have resorted to discounts on urea prices mainly driven by clearing off inventory levels, 1.4 million tones at end of July 2016 and ECC’s decision to clear NMFL’s urea inventory at even lower prices of Rs 1,310/bag. Therefore, both companies, FFCL & Pakarab Fertilisers Limited have lowered its MRP (maximum retail price) to Rs 1,300/bag from Rs 1400/bag.
Similarly, another two companies Engro Fertiliser and Fauji Fertiliser Company (FFC) have also lowered its MRP price to Rs1, 350 per 50 kg bag from Rs 1420.
It is important to mention here that government, in Fiscal Year 2016-17 (FY17) budget, reduced urea prices by Rs 400/bag to Rs 1,400/bag.
“We believe urea price discount by FFCL and Pakarab are unlikely to have any major bearing on pricing strategy of big players i.e. FFC and Engro Fertilizers in long term’. ‘We believe urea price discount by FFCL and Pakarab are essentially to clear off inventory levels ahead of lean demand season and is likely a short term phenomenon as we expect initiation of Rabi season from mid-October to restore pricing discipline in medium to long term”, said Syed Manib Imam, a research analyst.
Imam said FFCL and Pakarab has minor share of 8 percent in total urea industry offtake. Moreover, commencement of Rabi season from mid of October is likely to drive urea demand as major Rabi Crop (wheat) has historically consumes 45 percent of total fertilizer demand, he added.
Meanwhile, as per provisional numbers, urea industry’s offtake is expected to go up by 30 percent Year on Year (YoY) in August 2016, but expected to drop 29 percent Month on Month (MoM) mainly on account of fading Kharif season demand.