High-speed diesel (HSD) sales reached a nearly four-year high at 0.84 million tons in October, reflecting a sharp recovery in Pakistan’s economic activities, especially in the industrial and agricultural sectors of the country.
Head of Research (HOR) at Arif Habib Limited Tahir Abbas said, “Sales of diesel in October were the highest after March 2018.”
The two major consumers of diesel are the industrial and agriculture sectors. Vehicles such as Trucks require large quantities of diesel while transporting imported raw material from seaports in Karachi to factories across the country and delivering export cargo from factories to ports.
The large-scale manufacturing sector, especially construction (cement and steel), fertilizer, automobile, textile, and food group sub-sectors have reported a significant increase in production during the last several months.
Along similar lines, the agricultural sector posted record production of major crops including wheat, sugarcane, maize, rice, and cotton.
Abbas said, “Cotton production, which had been on the decline for the past several years, has finally rebounded in the current fiscal year 2021-22”.
Pakistan recorded economic growth of 4% for the previous fiscal year (FY21). The country has a projected growth rate of close to 5% for the current fiscal year, as per the State Bank of Pakistan (SBP).
According to Arif Habib limited, sales of diesel saw an increase of 25% to 0.84 million tons in October in comparison to 0.67 million tons in the same month of the previous year.
Abbas added that the rising economic activities had led to the common man benefiting in a way that a section of people was buying cars. “This practice is particularly seen in rural areas where farmers buy cars and bikes from their earnings through the sale of crops.”
Sales of petrol also increased by 12% to 0.77 million tons in October against 0.69 million tons in the same month of last year.
Abbas said, “Car sales have remained robust for over one year now as they surged 45%”.
Similarly, sales of furnace oil, commonly used to generate electricity, jumped by 12% to 0.33 million tons in October against 0.29 million tons during the same month of last year.
The analyst explained that the government had green-lighted production of electricity using furnace oil owing to rising coal prices in the global market and production from hydel sources declined in the country, adding, “Power consumption has grown 7% in recent times”.
Another reason for the government to allow the consumption of furnace oil to generate power is that both liquefied natural gas (LNG) import terminals were closed for the past few days for repair and maintenance.
Sales of all refined petroleum products including petrol, diesel, and furnace oil increased by 17% to 1.99 million tons in October against 1.7 million tons in October of last year.
Cumulative sales of petroleum products grew by 22% to 7.85 million tons in the first four months (July-October) of the current fiscal year in comparison to 6.44 million tons in the same period during the previous year.
The HOR added that the growth in the volumetric sale of petroleum products indicates that the notable increase in the price of petroleum products has not impacted sales so far. However, Abbas added, “full impact of the surge in price is yet to be seen since the government increased the petroleum product prices last time in the middle of the month (October) under review”.
