Doubts over Pakistan DAP winter import levels

20 June 2008 12:55  [Source: ICIS news]

By Mike Nash

LONDON (ICIS news)--Wide variations in the amount of phosphate fertilizer imports for the rest of 2008, due to concerns over a lack of offtake and high international prices, were reported by Pakistan importers on Friday.

One trader said a recent Fertilizer Review Committee (FRC) meeting reportedly concluded that 300,000-400,000 tonnes of diammonium phosphate (DAP) were required for the rabi (winter) crop.  

One source present at the meeting disputed this, indicating that no such figure was mentioned. A trader countered that the figure was quoted informally after the FRC meeting had closed.


Nevertheless, major importers such as Engro and Fauji conservatively estimated import requirements at a more modest 150,000-200,000 tonnes, sources at the companies confirmed.


Higher than normal level of DAP stocks in the country, currently assessed at 450,000 tonnes, had led importers to reassess the volume of fresh imports required.


“These inventories are 20-30% higher than normal for this time of year,” said one importer.


The added complication, said trader sources, was that the government was yet to decide if the recently announced increase in subsidy from Pakistan rupees (PRs) 470/50 kg bag ($7/50 kg bag) to PRs1,000/50 kg bag would apply to inventories or only to fresh imports. 


“DAP sales across the country are only 52% of the 2007 level for the January-May period, and importers estimate that demand will be around 20-25% lower due to high prices,” the importer added.


“There have been virtually no sales of DAP in the last two weeks at current prices,” said another importer, as prices were already too high.


The government had expressed a desire for importers and manufacturers to peg DAP prices at PRs3,000/50 kg bag at the FRC meeting.  This equated to around $900/tonne ex-Karachi, reflecting the price of imported tonnes bought earlier in the year.


However, importers were fearful that, due to rising international prices, domestic values would have to increase even further if further imports were purchased. 


Based on current CFR (cost and freight) prices of around $1,300/tonne, traders estimated that the ex-Karachi price would have to be around PRs5,000/50 kg bag. Even taking into account the PRs1,000/50 kg bag subsidy, this was still PRs1,000/bag above current market levels.


However, some producers were still confident that Pakistan would buy significantly more tonnage in the second half of the year.


“I’m confident Pakistan will buy more DAP,” said one Russian producer, based on forecasted strong commodity prices for crops.


Russian producers stood to gain the most in markets such as Pakistan due to the absence of Chinese product in the global supply chain in the second half of the year.


This followed the Chinese government’s decision to raise export duties by a further 100% on phosphates, effectively banning exports and taking 2.5m tonnes of DAP and monammonium phosphate (MAP) out of global supply.


Major DAP producers believed that the combination of a return of demand in Latin America, increased demand in the US and more Indian buying would all combine to push phosphate prices much higher in July and August, following a recent seasonal lull which had seen prices stagnate.


($1 = PRs67.11)

By: Mike Nash
+44 20 8652 3214

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