FocusMorocco, India in phosphates stalemate

01 April 2008 13:16  [Source: ICIS news]

LONDON (ICIS news)--The recent high-level meeting between India and Morocco has failed to resolve disagreements over phosphoric acid supply to an Indian fertilizer industry in desperate need of feedstock and has resulted in stalemate, traders confirmed on Tuesday.

 

“The North Africans are playing hardball,” one trader said.

 

According to official statements, the Indian delegation was assured “OCP would make all possible efforts to ship enhanced quantities of these raw materials…with [a] distinct and considerable price advantage to India vis-à-vis the prevailing international price”.

 

Office Cherifien des Phosphates (OCP) supplies India with much of its phosphoric acid and phosphate rock, used in the production of phosphate fertilizers.

 

However, traders reported the negotiations resulted in a stalemate. Indian buyers were reported to have countered OCP’s offers above $2,000/tonne (€1,260/tonne) CFR (cost and freight) by bidding at $1,800/tonne CFR.

 

OCP was reported to have declined the bid.

 

The meeting, which took place on Thursday in the Moroccan capital Rabat, comprised Moroccan Prime minister Abbas el-Fassi and India’s Minister of Chemicals, Fertilizers and Steel Ram Vilas Paswan.

 

The Indian government subsequently issued a statement saying: “Morocco will significantly enhance the supply of rock phosphate and phosphoric acid to India for manufacture of diammonium phosphate (DAP) fertilizer and other complex fertilizers”.

 

Indian trader sources, however, said many Indian DAP producers were in dire need of phosphoric acid.

 

“Many plants are either in the process of shutting down, or have done so already,” said one trader source.

 

“Only producers who rely on acid from South African producer Foskor are able to continue producing,” the source added.

 

“But there are only three domestic producers who source their acid from South Africa,” another trader said. The vast majority of producers imported their material from North Africa.

 

India is the largest importer of phosphoric acid in the world, importing 2.5m tonnes of acid annually and accounting for over 50% of global trade. Around 1.2m tonnes are imported directly from Morocco.

 

India is heavily dependent on imported acid to domestically produce phosphate fertilizers.

 

Hence speculation over the progress of negotiations between Indian importers and OCP has been rife in the international fertilizer market since the beginning of 2008.

 

However, the Indian fertilizer sector has been caught in a continuous vicious circle where North African producers, themselves limited by sulphur supplies, have shipped minimum acid quantities under 2007-2008 contracts. This has curtailed domestic fertilizer output, forcing India to import more DAP in a rapidly rising market.

 

At the same time, OCP has been able to secure significant price hikes in acid prices in contracts with European and Latin American buyers, culminating in a deal above $1,800/tonne CFR.

 

In comparison, 2007-2008 Indian contracts were agreed at $566/tonne CFR.

 

With domestic production falling behind target, the alternative is to import more DAP from the international spot market.

 

However, international DAP prices have similarly skyrocketed this year, on the back of strong demand due to high crop prices and limited supply.

 

The key reference US Tampa price has almost doubled from $600/tonne FOB (free on board) at the beginning of January to $1,157/tonne FOB currently.

 

Indian buyers have secured some phosphoric acid contracts for 2008-09, with Foskor agreeing a provisional price of $1,595/tonne CFR for its customers.

 

However, sources at OCP were last indicating $2,000-2,100/tonne CFR, and were unlikely to give much ground in subsequent negotiations.

 

($1 = €0.63)

By: Mike Nash
+44 20 8652 3214

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