BT cotton crop sowing to increase urea consumption

KARACHI - The sowing of BT cotton crop and increased farmer liquidity from higher credit availability with greater crop support prices would increase urea consumption in the country in coming years.
Keeping in view the past trend, the expected urea demand in calendar Year 2010 would affect the demand supply dynamics for the next 5 years.
Lubaina Jamali, a research analyst, said it has been on record that in August 2008 the instance of smuggling of urea across the Taunsa Barrage brought about a shortage of the fertilizer in the domestic market. And if the same were to be repeated urea shortage would be compounded and the benefit of a surplus would be lost to smugglers, she added.
It is also pertinent to state that the price differential between imported urea and locally manufactured urea in 3rd Quarter Calendar Year 2008 had risen sharply, hence the opportunity for rampant smuggling arose, before the crash of international prices eliminated gains from smuggling.
Price differential between locally manufactured and imported urea has compressed substantially in CY09, in the coming year as regional capacities comes online, chances are that the price differential may be squeezed further to prevent any smuggling opportunity.
Moreover, GoP is also faced with considerable pressure to restrain illegal transfer of goods in the name of Afghan Transit Trade, hence it is likely that steps shall be taken to prevent such transfers.
Lubaina said the volumetric sales of the Fauji twins are restricted by their nameplate capacities and hence, any possible impact on these companies is likely to be derived from the price impact of the demand and supply interaction in the next few years.
In anticipation of Engros 1.323mtpa urea complex start up in 2HCY10 and Fatima Fertilizers 0.3mtpa expansion that was expected to produce an exportable surplus by CY11, traders are setting the stage to trade surplus urea into neighbouring countries of Pakistan.
It is reported earlier that fake No Objection Certificates (NOCs) granting permission for export of Sona urea to Afghanistan have been caught by FBR, and grapevine also has it that concerned ministry officials are also being pressured to allow special permission for exporting another 9.42kt urea to Afghanistan.