Fertilizer Industry in Pakistan has been all along for a while since its independence. Pakistan being a agro based country has always been in need for the fertilizers and it provided a ground for new capital investment and growth. The fertilizer Industry in Pakistan was mere startup of General Ayub Khan who felt in need to promote the agriculture sector of the state and hence for it the “The green Revolution” was introduced.
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The 1971 Separation : The separation of East Pakistan was a huge disaster for the country. But it did not have so much adverse effects on the fertilizer industry. The reasons for not been affected was: The industry was not big at that particular time It had all its setup in the West Pakistan. But whatever the problem was, it was facing the financial crunch because, 80% of the wealth was in East Pakistan. This was one of the reasons that this industry could not grow. The other reason was low demand because the fertilizer which was being used mainly to fulfill needs was “Organic Fertilizer.”
The Nationalization: Although this industry was present at the time of nationalization, but this industry did not get nationalized because companies at that time neither were more in numbers, not big. Therefore, the nationalization process which started from 1972, could not have impact on this particular industry.
Review Of Events in fertilizer Industry:
1952
Nitrogenous fertilizers were introduced in Pakistan.
1957
1957 Lyallpur Chemicals and Fertilizers Limited (LCFL) is set up and designed to produce Single Super Phosphate (SSP).
1958
1958 Pak American Fertilizer Limited (PAFL) is commissioned and designed to produce ammonium sulphate.
1959
1959/60 phosphorus introduced in Pakistan
1962
1962 National Gas Fertilizer Factory is set up producing Urea, Ammonium Nitrate, and Nitric Acid.
1965
1965 Esso Pakistan Fertilizer Company Limited (EPFC) is incorporated and designed to produce urea 1968 Designed Capacity of PAFL is increased.
1966
1966/67 Potassium introduced in Pakistan.
1973
1973 National Fertilizer Development Corporation (NFDC) is established with an authorized share capital of 1000m. It’s mandate is to manage the existing fertilizer factories and to establish additional factories.
1976
1976 Capacity of LCFL is doubled.
1978
1978 NGFF is renamed Pak Arab Fertilizers after 48% stake is acquired by Government of Abu Dhabi.
1980
1980 Pak Saudi Fertilizer Company is established designed to produce urea.
1982
1982 Pak China Fertilizers Limited (PCFL) goes into commercial production. It is designed to produce urea.
1985
1985 Hazara Phosphate Fertilizer Limited is incorporated and is designed to produce Granulated Single Super Phosphate Fertilizer.
1986
1986 Government deregulates prices of nitrogenous fertilizers
1989
1989 Fertilizer Policy is announced providing incentives for fresh investment in the sector.
1990
19901991 Esso (Exxon) announces its intentions to sell 75% of its holdings in EPFC. Engro Chemicals Pakistan Limited is formed.
1993
1993 FFC once again came forward and put up another urea manufacturing facility at Goth Machhi to meet the growing demand. The new plant commenced commercial production
1994
1994 FFC has been ranked 5th Best Company of the Karachi Stock Exchange(KSE).
1997
1997 International Finance Corporation (ifc) Washington D.S signed an agreement to provide $ 18 million in loan to ENGRO fertilizer Pakistan ltd.
1998
1998 Engro in large part to investments made in the renovation of its plants in 1998, which increased production by 14%.
1999
1993 FFC once again came forward and put up another urea manufacturing facility at Goth Machhi to meet the growing demand. The new plant commenced commercial production
1999
1999 1999 Upon the request of the Fertilizer Unit, Ministry of Agriculture, Nepal, FADINAP Web site in-charge, Mr. Edgar Dante, and Research Assistant, Mr. Naripone Sivanunwong conducted follow-up training in Kathmandu on the development of their national Web site from 18 to 22 July 1999.
2004
2004 The Economic Coordination Committee
decided to maintain the ban on export of urea.
2004 Pak Arab unit is in an advanced stage of privatization.
2007
Engro Chemicals listed as the top 5 notable COP’s by the United Nations Global Compact sector.
The fertilizer sector in Pakistan currently comprises of 10 companies 4 of which are in the public sector (Hazara Phosphate Fertilizer (Pvt) Limited, Lyallpur Chemical & Fertilizer Limited, Pak Arab Fertilizer Limited, and Pak American Fertilizers Limited) while 6 are in the private sector (Engro Chemicals Pakistan Limited, Dawood Hercules Chemicals Limited, Fauji Fertilizer Company Limited and FFC-Jordan Fertilizer Company Limited, Pak China Fertilizer and Pak Saudi Fertilizer Company Limited – now owned by FFC).
The Economic Review of Fertilizer Sector:
Size Of Industry
No. Of companies 6
No. Of Plants 14
WAREHOUSES
Mian Chunnu, Faisalabad, Khanewal, D.G. Khan, Dera Ismail Khan, Sukuar, Lahore, Karachi, Larkana, Dadu, Thatta, Mirpur khs, Nawabsha, Multan, Sheikupura
TOTAL EMPLOYMENT
Direct employment:
31,000 people are directly employed in fertilizer sector.
4139 people /day
Indirectly employment:
Agriculture is the mainstay of Pakistan’s economy. It accounts for 24 percent of the GDP and employs 48.4 percent of the total labor force.
Total Exports :
In 2002/2003 Pakistan exported about 46 Thousand Tones of UREA
Total ImportsC:UsersAbdul HannanDesktop11-9c6e7e5d82.jpg
Major Players In the Sector
Fauji Fertilizer
FC was incorporated in 1978 as a PVT. Basically this was the joint venture between Fauji foundation and Haldor Topsoe of Denmark. The initial capital of the company was 813.9 Million Rupees. The present share capital of the company stands at Rs. 3.0 Billion. FFC has Rs. 1.0 Billion stakes in the subsidiary FaujiFertilizer Bin Qasim Limited (formerly FFC-Jordan Fertilizer Company Limited)C:UsersAbdul HannanDesktop16-f318d4125e.png
Products Offered:
Sona Urea: most widely used fertilizer in the country. Fertilizer is white in color, free flowing, readily soluble in water and both contain 46% Nitrogen. Because of its high solubility, it is suitable for solution fertilizers.
Sona DAP: is the most concentrated phosphate fertilizer containing 46% P 205 and 18%Nitrogen. It is the widely used phosphoric fertilizer in the world as well as Pakistan. it an ideal fertilizer, to meet the initial requirement of most of the crops.
Sona SOP :This fertilizer is an important source of Potash, which is a quality nutrient for production of crops especially fruits and vegetables. Potash improves the resistance of the plants against pests, diseases and stresses like water.
Urea Production and Purchases
FFC Urea Sales
Engro chemicals Pakistan Ltd:
Engro Chemical Pakistan Limited is the second largest producer of Urea fertilizer in Pakistan. The company was incorporated in 1965 and was formerly Exxon Chemical Pakistan Limited until 1991, when Exxon decided to divest their fertilizer business on a global basis and sold off its equity of 75% shares in our company. The Employees of Engro, in partnership with leading international and local financial institutions bought out Exxon’s equity and the company was renamed as Engro Chemical Pakistan Limited. Engro is a public limited company listed on the Stock Exchanges of Karachi, Lahore and Islamabad.
Products Offered:
Engro urea
Engro Zorawar
Engro Phosphate
Engro NP
Zingro
Engro DAP Engro Zarkhez
This graph represents the Profit after Tax per year for Engro Chemicals since 2001 and how it has been able to cut down the production costs making it the most efficient use of subsidized gas utility.
More over this graph shows the Zingro chemical sales from the period 2001 to 2008 in which the highest sales were in the year 2006 due to massive rainfall and a lot of crops around the country were on the urge to be dead.
Dawood Hercules Chemicals Ltd:
Dawood Hercules Chemicals Limited was incorporated as a public limited company on 17Th April 1968, as a joint venture between Dawood Group of Industries and Hercules Inc. USA. It was the first private sector venture in Pakistan to receive a loan from the World Bank and was the largest ammonia/urea plant in country at that time. Initially the plant’s capacity was 345,000 metric tons of urea per annum. The plant was revamped in 1989 / 1991 to enhance the capacity to 445,500 metric tons of urea per annum. Also, it made the manufacturing facilities more energy efficient and environment friendly. Dawood Hercules has the privilege of becoming the first fertilizer manufacturing company to obtaiISO-9000:2000 certification. Dawood Hercules also won numerous safety and excellence awards.
Products Offered:
Bubber Sher: The Company’s principal activity is to produce urea fertilizer. The Company markets its urea under the brand name Bubber Sher
These graphs representing the Urea production & sales and after tax profit for Dawood chemicals.
Major Players of the Industry:
As the graph shows the market share of all the players of the industry, it is clearly shown that major players of the industry are ENGRO and FFC. And this is the reason for selecting these companies as the major players
These graphs clearly represent the size of market share that Engro and FFC have in the market of fertilizers based upon the Urea capacity and its production.
Performance of Major Players: Engro and FFC being the largest players of the industry enjoy being the price setters for fertilizers. They act as the barriers to new entrants and, the new comers will not just be facing a intense competition but also huge competitors. In this particular industry, there is no local trade association in the country. The country is the member of the International Fertilizer Association (IFA). Pakistan trade Union defense campaign (PTUDC) which works for safeguarding the rights of the workers.
International Fertilization Association:
IFA developed a series of 12 principles for use in fertilizer operations globally.
All members shall demonstrate leadership and management commitment with regards to safety, security, health and environmental issues in fertilizer production, distribution and sales.
All members shall attempt for zero harm and adverse environmental impact whilst maintaining a healthy work place for all employees and contractual staff.
All members shall ensure that safety; security, health and environment issues are integrated into their corporate policy and receive the highest importance and priority.
All members shall ensure adequate financial and human resources for continual improvement of safety, security, health and the environment performance.
All members shall comply with local safety, security, health and environmental laws and strive to embrace international laws and best practices as much as possible.
All members shall establish and Improve their safety, security, health and environmental performance through annual objectives, targets or key performance indicators.
All members shall establish adequate procedures and controls to ensure that safety, security; health and environment are not put at risk at any time or in any form.
All members shall ensure that all employees and contractual staff have the right competence and are adequately trained and informed about safety, security, health and environment related to their specific activities, and shall encourage the participation of employees and contractual staff for further improvements.
All members shall adhere to the principles of hazard and risk assessment In evaluating all their activities to ensure that safety, security, health and environment standards are continually enhanced.
All members shall strive to subscribe to safety, security, health and environment management systems that will be subjected to internal and external auditing.
All members shall voluntarily share information with regards to experiences and lessons related to safety, health and the environment with all employees and
Pakistan’s Implication: Pakistani government tends to cope up with the international regulation by providing full Safety and health measures for the organizations. Moreover by providing necessary training and awareness programs for the safety of employers. On the other hand the companies are also being enforced to obtain ISO certification to maintain the standard up to the international level.
Major Problems Faced by the Industry:
Anti-dumping Duties (Source: Scribd.com/Pakistan Fertilizers)
1. The contracting parties recognize that dumping, by which products of one country are introduced into the commerce of another country at less than the normal value of the products, is to be condemned if it causes or threatens material injury to an established industry in the territory of a contracting party or materially retards the establishment of a domestic industry. For the purposes of this Article, a product is to be considered as being introduced into the commerce of an importing country at less than its normal value, if the price of the product exported from one country to another
(a)Is less than the comparable price, in the ordinary course of trade, for the like product when destined for consumption in the exporting country, or,
(b) In the absence of such domestic price, is less than either(i) The highest comparable price for the like product for export to any third country in the ordinary course of trade, or(ii) The cost of production of the product in the country of origin plus are reasonable addition for selling cost and profit.
2. In order to offset or prevent dumping, a contracting party may levy on any dumped product an anti dumping duty not greater in amount than the margin of dumping in respect of such product.
Impact on Pakistani industry:
The dumping of foreign fertilizer has hindered the growth of the local industry and resulted in decline in its net margins and profitability. Engro Chemical’s net Income in the first quarter of 1999 (January to March) eroded by 46 per cent to Rs.247 million, as against Rs.454 million during the corresponding period a year earlier. The drop in sales was due to imported urea. Excess supply of urea in the international market and the absence of any anti-dumping duties have made Pakistan a target for dumping by the producers in certain countries. According to market sources there is no custom duty or other tariff barriers against import of fertilizer and anyone is free to import.
As a consequence, certain countries whenever facing problem in selling urea in international market, they finding more convenient to dump their products in Pakistan. In the present situation the fertilizer industry is falling under the pressure of declining prices and cost push pressures.
Production Process of fertilizers:
UREA MANUFACTURING PROCESS
Urea is produced from ammonia and carbon dioxide in two equilibrium reactions: 2NH3+ CO2=NH2COONH4
Ammonium carbonate
NH2 COO NH4= NH2 CONH2+ H2O
Urea
Step 1 – Synthesis
A mixture of compressed CO2 and ammonia at 240 bars is reacted to form ammonium carbonate. This is an exothermic reaction, and heat is recovered by a boiler which reduces steam. If the mixture remains in the reactor long enough, the second reaction takes place: ammonium carbonate splits into water and urea.
Step 2 – Purification
The major impurities in the mixture at this stage are water from the urea production reaction and unconsumed reactants (ammonia, carbon dioxide and ammonium carbonate).The unconsumed reactants are removed in three stages3. Firstly, the pressure is reduced from 240 to 17 bars and the solution is heated, which causes the ammonium carbonate to decompose to ammonia and carbon dioxide: NH2 COONH4+2NH3+ CO2
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At the same time, some of the ammonia and carbon dioxide flash off. The pressure is then reduced to 2.0 bar and finally to -0.35 bar, with more ammonia and carbon dioxide being lost at each stage. By the time the mixture is at -0.35 bar a solution of urea dissolved in water and frees of other impurities remains. At each stage the unconsumed reactants are absorbed into a water solution which is recycled to the secondary reactor. The excess ammonia is purified and used as feedstock to the primary reactor.
Step 3 – Concentration
75% of the urea solution is heated under vacuum, which evaporates off some of the water, increasing the urea concentration from 68% w/w to 80% w/w. At this stage some urea crystals also form. The solution is then heated from 80 to 110oC to re dissolve these crystals prior to evaporation. In the evaporation stage molten urea (99% w/w) is produced at 140oC.The remaining 25% of the 68% w/w urea solution is processed under vacuum at 135oCin a two series evaporator-separator arrangement.
Step 4 – Granulation
Urea is sold for fertilizer as 2 – 4 mm diameter granules. These granules are formed by spraying molten urea onto seed granules which are supported on a bed of air. This occurs in a granulator which receives the seed granules at one end and discharges enlarged granules at the other as molten urea is sprayed through nozzles. Dry, cool granules are classified using screens. Oversized granules are crushed and combined with under sized ones for use as seed. All dust and air from the granulator is removed by a fan into a dust scrubber, which removes the urea with a water solution then discharges the air to the atmosphere. The final product is cooled in air, weighed and conveyed to bulk storage ready for sale
SINGLE SUPER PHOSPHATE MANUFACTURING PROCES
Single Super Phosphate, is manufactured in the fertilizer industry by the reaction of the sulfuric acid with the phosphorous penta oxide. Solid sulfur, S(s), is burned in air to form sulfur dioxide gas, SO2S(s) + O2 (g) SO2
(g)The mixture of sulfur dioxide and air is heated to 450oC and subjected to a pressure of 101.3 – 202.6 k Pa (1 -2 atmospheres) in the presence of a vanadium catalyst (vanadium (V)oxide) to produce sulfur trioxide, SO3(g), with a yield of 98%.2SO2(g) + O2 (g) 2SO3(g)Sulfur trioxide, SO3(g) is dissolved in 98% sulfuric acid, H2SO4, to produce di sulfuric acid, also known as fuming sulfuric acid or oleum, H2S2O7.SO3(g) + H2SO4H2S2O7 Water is added to the di sulphuric acid, H2S2O7, to produce dilute sulfuric acid, H2SO4=H2S2O7
(l) + H2O (l) 2H2SO4
(l)Sulfuric acid is added to the ground/crushed phosphate rock. Phosphoric content is kept at 16-21% for which phosphoric Penta oxide is used (P
SSP production involves mixing the sulfuric acid and the rock in a reactor followed by discharging the reaction mixture on to a slow moving conveyor in a den. It is cured for 4 to6 weeks before bagging and shipping.
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