As per the data released by NFDC, urea offtake for Jun’20 increased 4.9x/81% MoM/YoY to 1.16mn tons. The sequential increase in offtake was witnessed industry-wide, due to a combination of low base effect and pre-buying.

The farmers delayed purchases in the previous month in anticipation of subsidy. Meanwhile, disallowing 20% of expenses to industrial undertakings in case of sales to unregistered dealers (initially w.e.f Jul’20) led to pre-buying by the dealers (urea inventory down 63%MoM to 414K tons in Jun’20).

On cumulative basis, urea offtake declined 7%YoY to 2.6mn tons in 1HCY20, despite surreal pick-up in offtake in Jun’20, courtesy EFERT’s flattish urea offtake, in addition to in-operational LNG plants.

DAP offtake for Jun’20 clocked in at 175K tons, up 2.9x/26% MoM/YoY, where EFERT remained at the forefront. The cumulative offtake for 1HCY20 clocked in at 598K tons, flattish YoY. FFBL remained the only player posting a growth in DAP offtake (up 24% YoY in 1HCY20).

With LNG availability for next 3 months, we expect urea inventory to remain at or above 400K tons level. However, this may not be sufficient enough to constrict fertilizer players’ pass-on ability in case of any gas price hike (gas price increase delayed since Jan’20), in our view. (AKD Securities Limited and AKD Trade Online.)