Nervousness over latest Indian DAP tender - trader

01 October 2008 15:02  [Source: ICIS news]

LONDON (ICIS news)--The latest tender for imported phosphate fertilizer has caused considerable concern in the Indian market, over fears that further purchases at lower prices, which form the basis for subsidy payments made to local producers, will hit their bottom line hard, traders said on Wednesday.

The latest tender, called by Rashtriya Chemicals & Fertilizers (RCF) was for 145,000 tonnes of diammonium phosphate (DAP) fertilizer for November arrival to various ports. These were Dharamtar (50,000 tonnes), Mangalore (30,000 tonnes), Chennai/Tuticorin (25,000 tonnes) and 40,000 tonnes to Kandla.

The reason why RCF’s announcement had caused such nervousness in the industry, according to one trader, was that potential purchases around $1,000/tonne CFR would have a knock-on effect on the subsidy paid to domestic producers, based on the import parity scheme.

Indian CFR (cost and freight) prices have tumbled by $200/tonne in a month (from $1,200/tonne CFR) due to slack demand globally and falling feedstock costs.

Sources feared that, considering the bearish nature of the phosphate market internationally, further purchases would see prices fall even further, in turn cutting the subsidy paid to domestic DAP producers. 

The Fertilizer Association of India (FAI) was reported to have asked the government to review the formula under which the subsidy is calculated.

The RCF tender was scheduled to close on 6 October.

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By: Mike Nash
+44 20 8652 3214

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