1. FERTILIZER SECTOR OF PAKISTAN
Presented By: Fakhar Ud Din
Presented To: Prof. Dr. Qais Aslam

2. PRESENTATION OUTLINE
 Overview
 Types of Fertilizer
 Spot Analysis
 Budget overview regarding fertilizer
 Production process of Urea & DAP
 Supply-Demand Situation
 Demand Drivers
 Business Model of Fertilizer Sector
 Industry Structure
 Fertilizer Policy 2001
 Industry Porter’s Model
 SWOT Analysis
 Prospects of the industry
 Recommendations

3. OVERVIEW
An Economy Deriving 21.8% of Its Output from Agriculture:
 As of FY09, agriculture contributed 21.8% to the overall GDP.
 The demand for fertilizer is directly related to agriculture
growth.
 Urea is the most used fertilizer, followed by DAP.
Major Crops Production in Year 2008-09:
(mn tons) FY08 FY09 %Change
Wheat 20.9 23.4 11.7%
Rice 5.5 6.9 24.9%
Cotton(bales) 11.6 11.8 1.1%
Sugarcane 63.9 50 (21.7%)
Source: Economic Survey

4. TYPES OF FERTILIZER
 Eight different fertilizer products which falls into three categories.
1. Nitrogenous Category:
 Urea
 Calcium Ammonium Nitrate (CAN)
 Ammonium Sulphate (AS)
2. Phosphatic Category:
 Di-Ammonium Phosphate (DAP)
 Triple Super Phosphate (TSP)
 Single Super Phosphate (SSP)
 Nitro Phosphate (NP)
3. Potassic Category:
 Sulphate of Potash (SOP)

5. SPOT ANALYSIS OF FERTILIZER SECTOR
No. of Fertilizer Manufacturers 8
Capacity Utilization 110%
Industry capacity (urea mnt) 4.3
Industry capacity (DAP mnt) 0.44
Production (1HCY09 mnt) 3.06
Imports (1HCY09 mnt) 0.66
Source of Machinery Italy, England, Denmark, U.S.A,
Japan.
Plants in Pipeline 2

6. BUDGET OVERVIEW REGARDING FERTILIZER
Budgeted Measures
 Subsidy of PKR 10bn on urea imports
 Subsidy eliminated on phosphate and potash fertilizer imports
 Continuation of high support crop prices
 Feed gas is priced at PKR 94.7/mmbtu a 72% discount to fuel gas
price of PKR 339.4/mmbtu

7. UREA MANUFACTURING PROCESS:
Carbon Dioxide
Ammonia Urea Product
Ammonia Plant Urea Plant Handling &
Shipment
N
A
T P S
P S
U O T
O T Water
R W E
W E
A E A
E A
L R M
R M
G 50 Kg Urea
A Bag
S
Power Plant & Utilities

8. DAP MANUFACTURING PROCESS
Phosphoric Acid
Sulphuric Acid
Sand
Furnace Oil
Ammonia DAP Product
Ammonia Plant DAP Plant Handling &
Shipment
N
A
T P S
P S
U O T
O T Water
R W E
W E
A E A
E A
L R M
R M
G 50 Kg DAP
A Bag
S
Power Plant & Utilities

9. EXCESS DEMAND SITUATION-SELLER IS THE KING
 Capacity 5.8 million tons
 Demand 6.9 million tons
 The heavy demand is driven by:
 Attractive wheat support price of Rs.950 per 40 kg.
 Decent Cotton & robust Wheat crops.
 Reduction in Urea & DAP prices.

10. DEMAND DRIVERS
 Low Crop Yields
 Growing Population
 Fertilizer Prices
 Commodity Support Prices
 Water Availability
According to NationMaster
 Pakistan ranks 46th in the world in terms of fertilizers consumption,
where its fertilizer usage per hectare is 115 kgs.

11. PRICE TREND
Source: Industry Reports

12. INTERNATIONAL VS LOCAL DAP PRICES
DAP Local Rs/bag
US Gulf
3500
3000
2500
2000
1500
1000
500
0
Source: NFDC

13. BUSINESS MODEL OF INDUSTRY
 There are two types of business model operational in fertilizer
sector.
1. Manufacturing Model:
 Two types of fertilizers are produced in Pakistan which are
Urea & DAP.
2. Distribution Model:
 Import fertilizer and sell them in association with the local
dealer network.

14. INDUSTRY STRUCTURE:
 Eight fertilizer companies.
 The fertilizer sector in Pakistan is overseen by the Ministry of
Food, Agriculture & LiveStock.
 Oligopolistic Structure
 The four largest firm are price setters. However, subsidy on feedstock
to firms prevent these firms from exploiting their marketing power.
 Share of listed companies in Urea and DAP.
Urea Market Share- DAP Market Share-
1HCY09 1HCY09
15.03%
15.39% 26.46%
FFC Others
FFBL FFBL
9.56%
42.03% ECPL ECPL
58.50%
Source: NFDC

15. FERTILIZER POLICY 2001
 The last fertilizer policy was announced in 2001.
The Policy had been divided into two segments:
1. Providing feedstock gas to companies at subsidized rates.
2. Providing feedstock gas to new plants at a fixed price of US
$0.77 per mmbtu for a period of 10 years.
 Under the second segment , Engro & Fatima Fertilizer will
be rewarded with feedstock gas at US $0.77 per mmbtu for
a period of 10 years from the date of commission .

16. INDUSTRY PORTER’S MODEL
1. Barriers to Entry: High
 Limited supply of major raw material (Natural Gas)
 Capital Intensive nature of the industry
2. Bargaining Power of Suppliers: High
 Suppliers have the bargaining power as there are 4 major
players in the sector and the price is being determined by
them.
3. Bargaining Power of Buyers: Low
 Heavy Demand
4. Threat of Substitutes: Very Low
5. Competition: Low

17. SWOT ANALYSIS
1. STRENGTHS:
 Capital Intensive nature of the sector.
 The players operating in this sector are financially strong
 All the fertilizer plants are producing at more than 100 per cent
installed capacity of utilization
 GoP supports in the form of subsidy
 Cheap labor
 Heavy demand
 Well established distribution sector
 An agro based economy

18. SWOT ANALYSIS
2. WEAKNESSES:
 Low capacity as compared to demand (demand supply gap)
 Due to existence of black market and heavy demand farmers
had to pay above the stated price
 Technological backwardness: Lack of local resources

19. SWOT ANALYSIS
3. OPPORTUNITIES:
 As the demand is high compared to supply, fertilizer sector has
an opportunity to expand capacity to fulfill the local demand.
 Export
 Introduction of BT crops

20. SWOT ANALYSIS
4. THREATS:
 Scarce water resources
 Load-shedding of gas
 Hike in fuel prices
 Taxes
 Removal of subsidy
 Rising global prices of fertilizer products
 Government intervenes to stabilize the prices

21. PROJECTED EXCESS SUPPLY OF FERTILIZER IN WORLD
The export potential in the fertilizer sector of Pakistan remains
limited

22. ASIA FERTILIZER FORECAST 2007/2008-2011/2012
2007/2008 2008/2009 2009/2010 2010/2011 2011/2012
(000 tons)
N supply 72,123 76,317 79,933 85,491 89,850
Total demand 75,255 76,111 77,961 80,413 82,476
Surplus (2,132) 206 1,972 5,078 7,374
(Deficit)
P Supply 13,882 14,744 15,484 16,185 17,964
Total demand 19,209 19,890 20,560 21,168 21,784
Surplus (5,327) (5,146) (5,076) (4,983) (3,820)
(Deficit)
K Supply 5,428 5,524 6,226 6,450 6,530
Total Demand 14,485 15,138 15,794 16,464 17,073
Surplus (9,057) (9,614) (9,568) (10,014) (10,543)
(Deficit)
Source: IFA

23. RECOMMENDATIONS
 Strict quality control and monitoring should be there to prevent
import of sub-standard products and to curb adulteration and other
malpractices prevailing in this sector.
 The problem of logistics should be looked into. Transportation
through railway (being cheaper) especially during peak seasons
should be made available.
 There is a need to educate the farmers on balanced fertilizer use so
as to neutralize the adverse impacts of constant use of nitrogenous
fertilizers.