India, Morocco phosphoric acid Q1 ’12 contract talks stall

10 January 2012 13:01  [Source: ICIS news]

LONDON (ICIS)--Phosphoric acid contract talks have stalled after Indian buyers requested Moroccan fertilizer producer Office Cherifien des Phosphates (OCP) cut the first-quarter 2012 price by $150/tonne (€117.5/tonne), market sources said on Tuesday.

The rapidly declining export prices of finished phosphate fertilizers at the end of last year had threatened to pressure the negotiations to supply the raw material during the first quarter of 2012.

Buyers had initially said they would target a $60–80/tonne reduction on the $1,080/tonne CFR (cost & freight) price settled for the fourth quarter of 2011.

But a $115/tonne plunge in the benchmark US Gulf export price for diammonium phosphate (DAP) in late December placed further downward pressure on raw material prices.

“Indian buyers asked for a $150/tonne drop in price for phosphoric acid over prices agreed for the fourth quarter of 2011,” said one source.

“They will not accept a price that is higher than $930/tonne CFR.”

Although OCP declined to comment on the price cut request, a company spokesman countered claims that the talks had broken down and said the negotiations were continuing.

A sharp devaluation of the Indian rupee, coupled with farmers switching from an increasing expensive domestic prices for DAP fertilizer to cheaper nitrogen phosphate (NP) blends, set a bearish tone prior to the talks.

“There is no urgency to settle contracts, as domestic DAP consumption has dropped,” said a trader.

“The gap between the finished product and raw materials will need to be narrowed and producers have to make a little concession.”

On the international market, expected demand for DAP in the US, Europe, Latin America and southeast Asia in December failed to materialise, undermining the US Gulf export price.

Although cargoes had been sold at the beginning of December at $600/tonne FOB (free on board) Tampa, the next shipment sold at the end of the month at $485/tonne FOB Tampa.

In a bid to support declining export prices, OCP followed similar capacity reduction measures recently taken by other producers, announcing a 30% cut in phosphates output during the first quarter.

Russia’s PhosAgro is curtailing production by 18%, while US-based Mosaic is cutting DAP and monoammonium phosphate (MAP) output by 250,000 tonnes over the same period.

($1= €0.78)

For more on phosphates visit ICIS pricing fertilizers

By: Karen Thomas
+44 208 652 3214

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