N African phosphates output cut further by Moroccan curtailment

06 January 2012 17:50  [Source: ICIS news]

LONDON (ICIS)--Moroccan-based Office Cherifien des Phosphates (OCP) is cutting production by 30% during the first quarter of 2012, the fertilizer producer said on Friday.

The move, taken in response to sharply declining export prices on the diammonium phosphates (DAP) spot market, will reduce output by around 250,000 tonnes during the quarter.

“Usually there is strong demand from Europe at this time but the market is really quiet and the demand is low,” said a company spokesman.

OCP is following similar capacity reduction measures recently taken by other producers.

Russia’s PhosAgro announced an 18% curtailment - equivalent to around 108,000 tonnes of DAP - during the first quarter, while US-based Mosaic is cutting DAP and mono-ammonium phosphate (MAP) production by 250,000 tonnes over the same period.

In addition, OCP has agreed to requests from Indian buyers to delay contract cargoes of DAP from December to January and February.

India accounts for almost 50% of the phosphates market but a rapidly devaluing rupee had sparked calls for discounts and delays to contract shipments.

Although the phosphates market normally troughs towards the end of the year, the failure of demand to emerge in the US, Europe, Latin America and southeast Asia has starkly undermined prices.

The benchmark US Gulf export price plunged $115/tonne (€89.70/tonne) during December, but has now potentially found a floor on the last sale at $485/tonne FOB (free on board) Tampa.

Global financial concerns and lack of access to credit have underpinned delays to purchasing, especially in countries at the centre of the eurozone crisis such as Spain and Italy.

Although production at Tunisia’s Group Chimique Tunisien (GCT) DAP plants remain down due to civil unrest and union strikes, export prices have not eased.

GCT confirmed on Friday that production at the M’Dhilla, Skhira and Gabes facilities is sporadic, as rail blockades hinder phosphate rock being transported from the mines.

Although imminent, a re-start cannot be confirmed until the new government creates a sense of stability in the country.

“The government has said the plants should be cleared of demonstrators for the past two or three weeks,” said a company spokesman.

“But the government wants to negotiate rather than use force to remove the protestors,” they added.

The cuts in production coupled with firming corn prices sparked a run this week on the domestic US DAP market, which has lent some support to the weak export price.

The surge has lifted the export market to the $520-530/tonne FOB Tampa range, although there is still a risk of a second price dip if DAP sales into Europe and Latin America are small and scant during January.

($1 = €0.78)

By: Karen Thomas
+44 208 652 3214

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