January 04, 2013
A commercial agreement has been signed between Trading Corporation of Pakistan (TCP) and Saudi Arabia Basic Industries Corporation (Sabic) for the import of over 0.2 million tons of urea against $100 million credit facility provided by the Saudi Fund for Development (SFD).
Sources told Business Recorder on Thursday that talks for urea import under the credit facility were under process for last few months, however, the deal was matured during last month, when TCP Chairman Tahir Raza Naqvi visited Saudi Arabia and signed a commercial agreement.
Despite the fact that the domestic fertilizer industry has capacity of over 6.5 million tons urea annually against domestic demand of 6 million tons, the local market is witnessing urea shortage for last two years as plants are unable to produce urea due to gas curtailment. Therefore, with an aim to avoid urea shortage in the domestic market, the Economic Co-ordination Committee (ECC) of the Cabinet asked the state-run grain trader to import urea through open tenders and as well as from Sabic under the credit facility.
Sources said after a financial agreement between Economic Affairs Division and Saudi Fund for Development (SFD), the TCP has signed a commercial agreement with Sabic in the third week of December to finalise the urea import deal. The commercial agreement was signed by TCP Chairman Tahir Raza Naqvi and Sabic General Manager Abdul Nasser Al-Babtain in Saudi Arabia on December 17, 2012.
“As per commercial agreement, Sabic will supply approximately over 200,000 to 240,000 tons of urea to Pakistan under $100 million credit facility provided by SFD,” they added. They said Sabic will supply urea as per availability of the commodity and the first shipment is likely to reach Pakistan during this month. As per initial tentative schedule provided by Sabic some 115,000 tons of urea will be supplied during first quarter (January-March) of 2013. First shipment of 30,000 tons is likely to arrive in January, some 40,000 tons in February and a consignment of 45,000 tons of urea is likely to reach Pakistan in March 2013. Talking about the price, sources said urea price will be determined following the specific and already defined price formula between TCP and Sabic and on every shipment average urea price of leading markets will be applicable.
They said total supply also depends on the international urea prices and it is expected that up to 240,000 tons of urea will be supplied by Sabic under the SFD $100 million credit facility as currently urea prices are on lower side in the world market.
The federal government will be required to pay subsidy on imported urea to ensure cheap availability of the commodity in the domestic market. Last urea deal was finalised at some $400 per ton, in terms of Pak rupee calculated at Rs 38,800 per ton, while it is being provided to National Fertilizer Corporation at a price of 10,760 per ton following the decision of the ECC. Presently, urea prices stood at $400 per tons Free on Port (FoP) and $425-430 per ton Cost and Freight (C&F) in the international market. For the last three years Sabic is providing urea under SFD credit facility and during the last calendar year 223,597 tons of urea was supplied by Sabic under this facility.