Indian farmers on phosphate tightrope – FAI

04 December 2007 17:35  [Source: ICIS news]

NEW DELHI (ICIS news)--A lack of phosphoric acid imports is threatening domestic production of phosphate fertilizers, in turn leading to suppressed farmer demand, sources at the Indian Fertilizer Association (FAI) said on Monday.

 

“There have been supply issues [with North African suppliers],” said R C Gupta, Deputy Director General at the FAI.

 

“There is pressure to honour contracts as India is the largest importer of phosphoric acid – accounting for 53% of global trade – but in reality there are few penalty clauses which has some supply issues leading to disruptions in domestic phosphate fertilizer production,” Gupta added.

 

“There is lots of idle phosphate fertilizer capacity as result,” said Gupta. “India has the capacity to produce 7m tonnes of diammonium phosphate (DAP) per year, but it is forecast it will only produce 5m tonnes”.

 

According to Gupta, this is due entirely to the problems with phosphoric acid  and phosphate rock supply, rather than technical limitations with particular plants.

 

With global supply of phosphoric acid tight, market talk was already turning to contract negotiations for 2008, with reports that North African producers could be asking for $900-1,000/tonne CFR (cost, insurance and freight), up considerably from the 2007 level of $566.25/tonne CFR

 

“It is too early to say yet where prices will go,” added Gupta. “Some negotiations will take place at the forthcoming FAI conference in Delhi, but finalisation will not occur before the International Fertilizer Industry Association (IFA) conference in May/June next year.

 

One fertilizer agent did not rule out North African phosphoric acid producers pushing for half-yearly contracts rather than yearly agreements preferred by Indian buyers, in order to benefit from further price rises throughout the year rather than being locked in to one price.

 

“It’s only my personal opinion,” the agent said, “and I have no inside knowledge, but it would not surprise me.”

By: Mike Nash
+44 20 8652 3214

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