Fertilisers play a significant role in the growth and productiveness of crops. Fertilisers are an essential contributor towards the agriculture sector of any country. International experts analysed that the global Fertiliser market witnessed unprecedented turmoil in 2022, mainly because of Western sanctions against the Russian and Belarussian economies related to Russia’s invasion of Ukraine. High prices have driven farmers to cut down the use of fertilisers, which threatens to hinder grain production in some states. Prices presently have drifted downward, but there are signs that the storm has yet to pass, and new challenges could be around the corner.
The International Fertiliser Association (IFA) recorded that the impact of sanctions, high raw material costs and export restrictions led to the prospect of a dramatically reduced Fertiliser supply, and higher prices led to demand destruction in affordability-driven markets. Since then, some markets have stabilised, namely nitrogen and phosphate, while others remain disrupted, in the case of potash. Moreover, globally, fertiliser use declined by close to 3 per cent in 2021, falling to 194.7 million tonnes, and by close to 5 per cent in 2022, falling to 185.1 million tonnes. Global fertiliser use in 2022 was 15 million tonnes lower than the record-high level of 200.2 million tonnes reached in 2020.
|Pakistan: Fertiliser Supply Demand Situation (000 Tonnes)
|Kharif (Apr-Sep) 2022
|Rabi (Oct-Mar) 2022-23
|Source: National Fertiliser Development Centre
Decline in East Asia and South Asia
As per IFA statistics, in absolute terms, East Asia and South Asia led the worldwide decline in the two-year period, accounting for approximately 60 per cent of the reduction. In relative terms, three regions reduced their Fertiliser use by at least 10 percent over the two years: West Asia (down 17 per cent), West and Central Europe (down 15 per cent) and Africa (down 14 per cent). Furthermore, Turkey led the consumption decline in West Asia as a severe weakening of the lira aggravated fertiliser inflation. In West and Central Europe, fertiliser use suffered from both higher prices and the 2022 drought. In Africa, where farmers are sensitive to higher fertiliser prices, potassium consumption dropped by almost half (44 per cent), significantly more than in other regions.
In Pakistan, the sector’s economic significance is high as it plays a vital role in ensuring food security. During FY2022, destruction caused because of the flash floods may impact the fertiliser offtake in the ongoing crop season of Pakistan. No doubt fertilisers are nutrients essential for the growth of plants and crops. There are three main types of fertiliser used by the agricultural sector. These include Nitrogenous Fertilisers like Urea and CAN, Phosphorous Fertilisers such as DAP and Potassium Fertilisers including NPK and NP. The most common type of fertilisers are nitrogenous fertilisers (mainly Urea) because of their vital properties and lower prices as against to other types of fertiliser.
This sector is dominated by five players which occupy almost ~95 per cent of the market share. This makes the sector oligopolistic in nature. The sector contributes 3.9 per cent to the Large-scale Manufacturing (LSM) sector and 0.5 per cent to the overall GDP of Pakistan. Due to agriculture sector’s immense economic significance, the Government of Pakistan has set out relief and subsidy programmes, which leads to higher demand for fertilisers. Crop outputs, credit disbursement of agricultural sector, government strategies, weather situations and soil health are a few of the main drivers of demand for the fertiliser sector. Statistics showed that fertiliser contributes on an average 30 to 50 per cent towards crop’s yield. Urea and Diammonium Phosphate (DAP) are the major fertilisers used in the country.
Overall domestic production of fertilisers during FY2023 (July-March) declined by 8.3 per cent over the same period of FY2022. In addition, the import of fertiliser also declined by 26.2 per cent, therefore, total availability of fertiliser declined by 11.2 per cent during FY2023 (July-March). Total offtake of fertiliser nutrient witnessed decline by 15 per cent. Reduction in fertilisers offtake is because of high prices of Phosphatic and Potash Fertilisers in international/domestic market and flood 2022.
Punjab’s share in Urea offtake was 67.7 per cent, followed by Sindh (24.4 per cent), KP (4.4 per cent) and Balochistan (3.5 per cent). Subsidy in the form of cheap natural gas and budgeted subsidy was given on RLNG for two urea plants and imported urea by the government during FY2023.
Statistics also showed that total availability of urea during Kharif 2022 was about 3,460 thousand tonnes, comprising of 200 thousand tonnrs of opening inventory, 3,158 thousand tons of domestic production and 103 thousand of imported supply. Total urea offtake was about 3,137 thousand tonnes, leaving inventory of 294 thousand tonnes for Rabi 2022-23. Availability of DAP was 912 thousand tonnes, comprising of 276 thousand tonns of opening inventory, 451 thousand tonnes of local production and 185 thousand tonnes of imported supplies. DAP offtake was 490 thousand tonnes leaving an inventory of 460 thousand tonnes for the upcoming Rabi 2022-23. Rabi 2022-23 started with an opening inventory of 294 thousand tonnes of urea. Domestic production during Rabi 2022-23 was estimated almost 2,928 thousand tonnes and 298 thousand tonnes of imports. Thus, total availability was about 3,520 thousand tonnes. Offtake was estimated around 3,470 thousand tonnes, leaving a closing balance of 67 thousand tonnes for upcoming Kharif 2023. DAP availability during Rabi 2022-23 was estimated about 988 thousand tonnes, which includes 460 thousand tonnes of opening inventory, domestic production of 226 thousand tonnes and 302 thousand tonnes of imported supplies. Offtake of DAP during Rabi season 2022-23 was about 702 thousand tonnes, leaving a balance of 284 thousand tonnes for next season.
More recently the government officials has made a pivotal decision to offer an uninterrupted gas supply to the fertiliser sector. This move aims to make sure an ample production of urea to meet the growing demand for the upcoming Rabi crop season.