FFC increases Urea prices by Rs80 per bag

March 14, 2022 (MLN): Fauji Fertilizer Company Limited (PSX: FFC) has increased Urea price by Rs80 per bag on a Dealer Transfer Price (DTP) basis to Rs1,803 per bag effective from March 13, 2022, compared to the previous DTP of Rs1,723 per bag.  

In terms of retail prices, new effective retail prices are Rs1,863 per bag. This is the first urea price increase by the fertilizer industry since August 7, 2021, while the retail prices were increased to Rs1,768 per bag on August 7, 2021, a report by Next Capital noted.

The other companies like EFERT, FATIMA and AGL will likely notify a similar increase in prices in the upcoming days, ensuring no differential exists between prices of different manufacturers, it said.

This price increase would compensate for inflationary pressures such as transportation, labour and packaging costs, which were not passed on for the past two quarters.

The report further noted that smuggling of Urea towards Western Asian countries and extremely low inventory levels have provided manufacturers to exercise their limited pricing power and increase prices. We believe that this price increase would not deter any demand considering the upcoming Kharif season.

According to prices quoted by NFDC, retail prices of Sona Urea are already hovering near Rs1,975 per bag level.

If subsidized feed gas costs Rs302 per mmbtu are increased in line with fuel costs Rs1,023 per mmbtu, it would require an increase of around Rs800 per bag on the ex-refinery basis for FFC to completely pass-on incremental costs.

Similarly, in case of rationalization of GST rates and upward revision in GST rate on urea from 2% to 17%, manufacturers would have to raise urea prices by around Rs270 per bag to break even on current DTP levels.

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