India’s RCF scraps two phosphate fert tenders

23 October 2008 13:32  [Source: ICIS news]

LONDON (ICIS news)--India’s Rashtriya Chemicals & Fertilizers (RCF) has scrapped two phosphate fertilizer tenders even though it received offers at very low levels, Indian fertilizer sources said on Thursday.

The move prompted speculation that other major importers had put pressure on RCF to not buy at such low levels, as it would adversely impact the subsidy paid to domestic producers under India’s import parity scheme.

Under the scheme, the level of subsidy paid to domestic producers would fall if CFR prices fell too rapidly.

RCF originally closed one tender for diammonium phosphate (DAP) fertilizer on 17 October, receiving four offers from importers and traders at prices ranging from $895-930/tonne CFR (cost and freight).

This was down $140-175/tonne from the last business done, which was around $1,070/tonne CFR, with lower prices attributed to weak demand outside India.

Prices were never officially disclosed, but it is understood that discussions between RCF and trader Gavilon did take place at $895-899/tonne CFR. The tender was subsequently scrapped.

RCF also issued another tender for 10,000-15,000 tonnes of DAP/monammonium phosphate (MAP) for blended fertilizer production, which was meant to close on 23 October, but was postponed without a future date given, sources said.

Indian domestic DAP production has consistently lagged behind target in 2008 due to a lack of financial support as well as technical reasons and feedstock issues, prompting demand for more DAP imports.

“The demand [for DAP] is there [in India],” said one trader. “I think India could easily import 500,000 tonnes/month between now and March 2009.”

If true, this would lend support to a market that has suffered from the absence of demand in key importing countries such as Pakistan, Argentina and Brazil, which has been caused by falling crop prices, high fertilizer stocks, lack of credit availability and market sentiment that fertilizer prices will fall further.

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By: Mike Nash
+44 20 8652 3214

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