Jordan phosphate FM unlikely to disrupt India deals

09 July 2008 15:45  [Source: ICIS news]

LONDON (ICIS news)--The decision by Jordan Phosphate Mines Co (JPMC) to declare force majeure on phosphate rock shipments worldwide looks unlikely to disrupt supply to Indian phosphate fertilizer producers, trader sources said on Wednesday.

“The JPMC announcement won’t cause any disruption but it will mean rock will be considerably more expensive for Indian importers,” said one trader.

A deal to double prices from the current $150-200/tonne (€96-128/tonne) FOB (free on board) level was at an advanced stage, the trader added.

JPMC justified its declaration of force majeure all phosphate rock contracts by indicating to customers that it could not supply at existing prices due to increased energy costs and would have to renegotiate its contracts.

Indian sources discounted this as a legitimate reason.

“JPMC stage managed this charade,” said one Indian trader. “Mining costs are not that high,” he added.

“JPMC knows that imported phosphate rock dependent fertilizer producers are enjoying $500/tonne margins at present,” said the trader.

“Under the unified subsidy system in India, these producers are heavily favoured,” he said.

JPMC had been locked into long-term contracts at $150-200/tonne FOB.

“This price is ridiculously low [compared with current market levels],” said the trader.

“What JPMC has done is raise prices to bring them into alignment with what it could achieve outside India.”

This followed Amman’s decision to withdraw all subsidies on petroleum products, reportedly resulting in a three-fold increase in phosphate rock production costs, according to another Indian phosphate rock importer.

The increase in energy prices prompted strikes on the railway and by truckers. Approximately 40% of JPMC’s rock is railed from the mines with 60% moved by truck.

India imported 5.2m tonnes of phosphate rock in 2007, of which 2.6m tonnes or 50% were sourced from Jordan. JPMC is similarly dependent on the Indian market, with 72% of its exports destined for this market.

Phosphate rock is used in the manufacture of finished phosphate fertilizers, including diammonium phosphate (DAP).

($1 = €0.64)

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By: Mike Nash
+44 20 8652 3214

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