India's government will secure DAP supplies

06 February 2008 17:02  [Source: ICIS news]

By Mike Nash

 

LONDON (ICIS news)--A government mandate will be used to secure supplies of diammonium phosphate (DAP) fertilizer in India for the coming kharif season on the assumption that necessary funds will somehow be found to subsidise imports to farmers, a trader source said on Wednesday.

 

“Politically, failure to do so is not considered an option with elections imminent,” the trader said.

 

“There is growing awareness that supply internationally is tight,” the trader continued.

 

This has been exacerbated by news of the 35% export duty curtailing Chinese DAP availability.

 

Already, international trader company Trammo was reported to be offering DAP ex-China at $900/tonne CFR (cost and freight).

 

India last imported DAP in December at prices almost almost $400/tonne below this level.

 

Since then, values have firmed dramatically, based on strong demand in all major markets and tight supply.

 

US export organisation Phosphate Chemicals Export Association (PhosChem) and Jordan Phosphate Mines Company (JPMC) were yet to agree the next round of contract buying with Indian buyers.

 

“The Jordanians are reluctant to commit ahead of US producers," said a trader close to JPMC.

 

“It is determined not to settle prices too early for supplies that will commence in April,” the trader added. By then, DAP prices could have risen considerably.

 

However, it did not appear likely that buyers would wait for imported phosphoric acid contract prices to be settled before stepping into the DAP market, another trader continued.

 

Indian buyers use phosphoric acid to produce DAP domestically and acid imports into India account for over half of world trade.

 

There was an increasing awareness that phosphoric acid prices would be very high in 2008-09, a trader said, hence there was justification for securing as much DAP as possible.

 

The trader said that an agreement with US DAP suppliers would be reached during February.

 

It is estimated that phosphoric acid shipments under existing contracts with North Africa could be down by 200-250,000 tonnes P2O5 nutrient, as North African producers dragged their feet over shipping remaining commitments at prices agreed almost a year ago, while costs of inputs such as sulphur had skyrocketed.

 

This could cut domestic DAP production by as much as 0.5m tonnes, a trader said, meaning India could require even more DAP by imported means to cover the shortfall.

By: Mike Nash
+44 20 8652 3214

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly