Fertiliser shortage of 240,000 tons expected in December 2011

Urea shortage is expected to stand around 240,000 tons in December following the government’s decision to cut 100 mmcfd of gas to fertiliser manufacturers despite previous commitment to supply gas till December 31, according to figures released by the fertiliser industry.

The government is aware that the only way to overcome the shortage is to provide gas to all fertiliser plants on the SNGPL network till December 31st, says some industry players. Wheat production target for Rabi season will not be met and food inflation could rise if the issue is not resolved, officials related to the industry said.

According to the breakup of figures, the stock in hand was 200,000 tons on 30 November, current projected local production will be 360,000 tons while 100,000 tons of imported urea is expected to reach farmer, totalling to 660,000 tons available for December.

Hence, with the total demand for urea standing at 900,000 tons and supply of 660,000 tons, there will still be a shortage of 240,000 tons in December.

The above import schedule totals to 258,000 tons expected by December 16. However, it is estimated that only 100,000 of this amount will reach farmers in December.

The decision to stop gas supply to Agritech and Dawood Hercules will create further supply pressures and result in price hike, according to industry players.

They also said that the fertiliser sector, till date, has been subjected to 55% curtailment against 40% or less curtailment to other manufacturing industries. The government did try to import urea and avert the shortfall, however, it is believed that it may be too late as shipments maybe delayed and there is a logistical issue of bagging urea at the ports and distributing them across the country. Never before in December, has the country imported 700,000 tons of urea.

Urea sales declined one per cent to 518,000 in October due to prolonged shut down of Sui Northern Gas Pipelines Limited-based plants and persistently low gas supply to urea manufacturers.

Among listed players, Engro posted a substantial decline of 46% to 65,000 tons in urea sales. Fauji Fertilizer Company jumped 8% to 218,000 tons while Dawood Hercules posted highest decline of 40% to 190,000 due to persistent shut down owing to gas cuts. (Courtesy: Express Tribune)