2. AGENDA
• Overview
• History
• Importance
• Types of Fertilizers
• Key Industry Players
• Working Units
• Raw Materials & Associated Problems
3. AGENDA
• Government Policies
• Industry Trends
• Demand Supply Analysis
• Imports
• Porter’s Five Forces Model
• Issues
• Solutions
4. OVERVIEW
• Semi industrialized/agrarian economy.
• 55% of labour force in agriculture
• Manufacturing based on textile and sugar.
• Soil deficient in nutrients.
• New methods and farming technology.
• Use of fertilizers for better results
5. HISTORY
• No fertilizer plants at inception
• 10 plants operating, 6 private & 4 public.
• Foundation laid in Green Revolution
• 1958 – first public fertilizer plant set up by
NFC
• 1965 – first private plant at Dharki by Exxon
• Fertilizer use increased in 1966-67 after
introduction of HYV seeds
6. • Sector highly regulated till 1986, government
fixed prices.
• Stifled the private sector – huge demand
supply gap
• Urea prices deregulated in 1986
• 1991 – urea imports had risen to 27% of
installed capacity
• 1991 – fertilizer policy gave incentives for new
plants and expansions
7. • Pak China fertilizer privatized in 1992
• Pak Saudi Fertilizer purchased by Fauji
Fertilizer in 2001
• Subsidies on nitrogenous fertilizers abolished
in 1986
• Subsidies on phosphates abolished in 1993
• Subsidies on potash abolished in 1997
• Provincial quotas abolished & 15% sales tax
implemented in 2001
• Except urea, farmers had to pay international
prices of all imported products
8. IMPORTANCE
• Agriculture & livestock – 22% of GDP
• Population growth rate – 2.2%, more people
to feed
• Proper fertilizer use increases yield &
productivity
• 1989-90 – 101.3% increase in fertilizer usage
led to 57.4% increase in food production
9. TYPES OF FERTILIZERS
Three main categories:
• Nitrogenous Fertilizers
• Phosphate Fertilizers
• Potassic Fertilizers
10. NITROGENOUS FERTILIZERS
• Urea is the main nitrogenous fertilizer used
• Domestic production in 2009-10 – 5,154,883
tonnes
• Ammonium sulphate & calcium ammonium
nitrate also produced.
• Can and urea production together accounted
for 82% of domestic production in FY2009-10
11. PHOSPHATIC FERTILIZER
• Includes Di-ammonium phosphate, Triple
super phosphate, Single super phosphate &
Nitro phosphate
• DAP production started in 1999 by Fauji
Fertilizer
• 2009-10 DAP production – 65,889 tonnes
• 17% increase since previous year
12. • Phosphates help plant use water effectively
and help in seed germination
• Phosphate production is 16% of total domestic
production
• DAP helps counter acidic effect of urea &
maintain soil fertility
16. • Engro Fertilizers
• Fauji Fertilizer Company
• Fauji Fertilizer Bin Qasim Ltd
• Dawood Hercules Chemicals Ltd
17. ENGRO FERTILIZERS
• Wholly owned subsidiary of Engro Corporation
• Incorporated in June 2009
• Urea manufacturing capacity expanded with
ENVEN 1.3 – went into production in
November 2010
• Urea market share 23%, phosphate market
share 29% in Sept. 2011
18. • Market share expected to increase
• Biggest fertilizer manufacturing facility in the
world
• Expected production – 1.3 million tonnes of
urea
19. FAUJI FERTILIZER COMPANY
• Incorporated in 1978
• Joint venture between Fauji Foundation &
Haldor Topsoe A/S of Denmark
• Started with share capital of Rs 813.9 million
• Today share capital is Rs. 8.48 billion
• Stakes in FFBL, FCCL & FFCEL
20. • Commercial production in 1982
• A second plant set up in 1993
• Major shareholder in the DAP manufacturing
complex
21. FAUJI FERTILIZER BIN QASIM LIMITED
• Started in 1993 as FFC-Jordan Fertilizer
Company
• DAP plant suspended in 2001 due to loss of Rs
6.5 billion
• Resumed in September 2003
• Renamed in 2003 after Jordan Phosphate
Mines Co sold off shares
22. • Phosphoric supply agreement terminated
• Only company to produce DAP & Granular
Urea
• 51% market share in urea and 65% market
share in phosphates
• Pakistan Maroc Phosphore S.A. established in
Morocco
• Joint venture between OCP and Fauji Group
• Production capacity – 375000MT
• Ensure raw material supply
23. DAWOOD HERCULES CHEMICALS
LIMITED
• Incorporated in 1968 – public company
• Joint venture between Dawood Group &
Hercules Inc. USA
• First manufacturer to obtain ISO-9000:2000
• 5% market share in urea
• Dawood Hercules Fertilizers incorporated in
2010 after a demerger
27. UREA PRODUCTION
CO2 NH3
UREA REACTION
STRIPPING
DECOMPOSITION
EVAPORATION
PRILLING/GRANULATION
UREA
28. WORKING UNITS
• 4 public sector, 6 private sector units
Public sector units:
• Hazara Phosphate Fertilizer (Pvt) Limited,
• Lyallpur Chemical & Fertilizer Limited,
• Pak Arab fertilizer Limited and
• Pak American Fertilizers Limited.
29. Private sector units:
• Engro Fertilizers Limited,
• Fauji Fertilizer Company Limited,
• Pak China Fertilizer,
• Pak Saudi and
• Fauji Fertilizer Bin Qasim Company Limited.
• Dawood Hercules Fertilizers Limited
30. • Total urea sales in Sept. 2011 – 4.24 million
tonnes.
• 3.72 million tonnes produced locally
• DAP sales – 668kT
• 429 kT produced locally
31. RAW MATERIALS & ASSOCIATED
PROBLEMS
• Large amount of energy required for ammonia
synthesis
• 80% of energy consumption – synthesis of
ammonia
• Natural gas used since discovery at Sui and
Mari
32. • Gas sold at subsidized rates – 50% subsidy for
urea production
• Reduced gas supplies due to gas shortage
• Increased prices of urea
33. NATIONAL FERTILIZER CORPORATION
• Provides fertilizers and agronomic services
• Provides CAN, urea, NP, SSP, zinc sulphate
• Incorporated in 1972 at Lahore
• Successor of PIDC
• Launched 6 new companies in 1974
34. • Built storage locations for fertilizers
• Helped reduce pressure on transport system
• Ensure constant supply of fertilizer
• Technical training institutes in Multan, Punjab
and Haripur, KPK
36. FERTILIZER POLICY 2001
• Announced on July 1, 2001
• Withdrawal of prevalent subsidies
• 50% increase in gas tariff for next five years
• Provided new investors a gas price that
enabled them to compete in the domestic
market
• A discount of 10% was allowed to facilitate
new investment.
37. • Rock phosphate and phosphoric acid
importable by manufacturers of fertilizer
shall remain importable free of custom duty.
• All raw materials required for NPK production
are allowed to be imported free of duties &
taxes
• Government intervention in price control
may help boost availability of fertilizers to
the farmers.
38. NATIONAL GAS ALLOCATION &
MANAGEMENT POLICY 2005
• Limited gas deposits
• Govt. focusing on enhancing gas supply –
exploring new sites & importing gas
• Gas supply targets set by federal government
• First priority given to domestic and
commercial services
• In the independent network fertilizer plants
get most priority
39. • Policy implemented by a committee that will
review the allocation
• Applicable to all consumers connected to the
gas and independent network
• OGRA will make amendments where
necessary
46. FACTORS AFFECTING DEMAND
• High dependency on agriculture
• Soil deficient in nutrients
• Animal manure cheap substitute, it doesn’t
provide necessary nutrients
• 2.2% population growth rate
47. • Recent floods reduced short term demand
• Over usage as a result of gas subsidy, low
market price of urea and uneducated farmers
• Demanded all year round for both Rabi and
Kharif crops
49. FACTORS AFFECTING SUPPLY
• Price of inputs
• Urea raw material available locally, less costly
production
• DAP raw material imported, more costly
production
50. • Gas curtailment – local production suffering
• Only one local DAP producing facility
• Most of the DAP requirement met through
imports
57. RIVALRY
• High fixed costs
• Negligible perceived differences between the
brands
• Prices fixed – price competition impossible
• FFBL has sole DAP production facility
• Engro imports and sells DAP
• A little competition between these two
58. THREAT OF NEW ENTRANTS
• High barriers to entry
• Difficult to acquire government approval for
gas allocation
• Production of DAP very costly – requires
imported raw materials
• High infrastructure costs
• Existing brand names – difficult for new
entrants to survive
59. POWER OF SUPPLIERS
• Gas subsidies given by government
• Long term agreements
• Firms can’t influence market prices
• Hence supplier power is very low
60. THREAT OF SUBSTITUTES
• No proper substitutes
• Natural fertilizers can be used but not as
effective
• Animal manure not suitable for commercial
production
61. BARGAINING POWER OF BUYERS
• No alternate for urea – have to buy it
irrespective of prices
• Urea used as an alternate for DAP
• When DAP prices increase, urea sales increase
and DAP sales fall
63. • Reduction in gas supply
• 46% production capacity based on SUI – 20%
gas curtailment
• Mari based plants facing 12% curtailment
• Production expected to fall by 0.9 million tons
• Urea prices increase – Rs 750/bag to Rs
1800/bag
• Increase in urea imports
• TCP approved import of 0.7 million tonnes of
urea
64. • Only FFBL produces DAP locally
• No incentives given for local DAP production
• DAP imports increase import bills
• International DAP prices went up by
4%, reduced profit margins
• Uneducated farmers – unbalanced use of
fertilizers
• Extra demand – increase imports
• Retailers sell at prices higher than those
agreed upon by companies
66. • Tackle the gas problem
• Explore reserves at Badin, Murree, Kohlu &
Sanghar
• Use substitutes for domestic purposes – more
gas for fertilizer
• Use bio gas for domestic use and vehicle fuel
• Educate farmers – balanced use of fertilizers
67. • Provide incentives for local DAP production
• This will help fill the DAP demand – supply gap
• Print prices of fertilizer on the bags – reduce
black marketing and overcharging of prices
Deregulation unable to offset the loss…….. Urea imported in high amountsPak china bought by Schon grupPak saudi – 2nd plant to be privatized
Additional 3.5 million people to feed every yrIncreased productivity – less poverty
Incorporated after demerger of fertiolizer division from engro chemical
Joint venture produces phosphoric acid
Graph shows how sales increased over the last 2 decadesArea cultivated didn’t increase as muchFertilizer use increased food production, thus more fertilizer used. Dip in 2008 coz of recessionDip in 2010 coz of floodFlood dip expected to rise – happened a few years before as wellIncrease so much because farmers put extra fert.. More than they needPicture shows recommended and actual usagePhosphorus ka usage is more than recommendedThis harms soil
Imports of DAP fluctuatingWent down in 2008 coz of recessionDown in 2010 coz of floodsEngro imports and sells DAPFfbl doesn’t import coz produces locallyImport volume overall reducing coz of high international pricesWhen prices rise, farmers switch to urea instead of DAP
International n local prices of urea risingLocal prices rose coz of gas curtailment issues20% increase betwenndec 2010 n march 2011During this time international urea prices fell. They started rising in April 2011.
Increase in local DAP prices more than increase in internationalLocal – 30% between dec 2010 n march 2011International – rose steadily by 10% in 1st quarter of 2011
Shows crop wise consumption of fertilizersOverall consumption has increased.Inc population – increasing food demand – more crops – more fertilizersWheat is most widely cultivated, thus most consumption in wheat
Local production unable to meet demand….. Lots of urea import in 2009Between 2000 – 2003, hardly imported urea
Gas curtailment – low production – increased urea importsEngro’s plant not working to full capacity otherwise wudve been self sufficient in urea
