Urea prices are projected to increase by at least Rs. 100 per bag due to the government’s commitment to the IMF to implement a semi-annual gas tariff adjustment by February 2025.
In its recent report, the IMF revealed that the Federal Government has agreed to announce the adjusted tariff rates semi-annually to meet the revenue requirements of the Sui companies. Recently, both Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipelines Limited (SNGPL) submitted formal requests to OGRA for a gas price increase of up to 50 percent to cover their estimated revenue needs for FY 2024-25.
Earlier this year, the caretaker government approved a 175 percent gas price hike specifically for fertilizer manufacturers on the SNGPL network, leading to a urea price increase of approximately Rs. 900 per bag.
According to Tanveer Ahmed, analyst at Topline Securities, “As seen earlier in February 2024, fertilizers players on Sui Network will be impacted by this incremental gas cost and they will be forced to revise their urea prices upwards. Typically, other fertilizer producers also follow suit even though their input costs remain unchanged.”
The latest monthly report from the National Fertilizer Development Company (NDFC) reveals that total urea offtake during Kharif 2024 (April to September) stood at 2.74 million tons, which was 21 percent lower than the anticipated demand due to weak farmer economics. Meanwhile, DAP demand was 642,000 tons.
However, industry figures suggest that urea and DAP demand is not expected to change significantly on an annualized basis as, compared to the last quarter, their offtake has shown signs of recovery ahead of the Rabi season.
Based on historical averages, the total urea demand during Rabi 2024-25 is projected around 3.43 million tons, while DAP demand is estimated around 940,000 tons. Sufficient fertilizer stocks are available to meet market demand as all fertilizer manufacturers, including RLNG-based plants on subsidized gas until December 15, are currently operational.
Follow ProPakistani on Google News & scroll through your favourite content faster!
Support independent journalism
If you want to join us in our mission to share independent, global journalism to the world, we’d love to have you on our side. If you can, please support us on a monthly basis. It takes less than a minute to set up, and you can rest assured that you’re making a big impact every single month in support of open, independent journalism. Thank you.
