India blocks distribution of low-price phosphates fertilizer imports

20 February 2012 11:30  [Source: ICIS news]

LONDON (ICIS)--The Indian government has blocked the distribution of low-price spot phosphates fertilizer cargoes to retail outlets until after 1 April, officials said on Monday.

The move comes after a spate of spot cargoes of diammonium phosphate (DAP) bought at $77/tonne (€59/tonne) below the contract price set between major Indian buyers and suppliers in September at $677/tonne CFR (cost and freight).

The contract price for DAP is set at parity with a national nutrient-based subsidy (NBS) scheme to ensure importers recoup costs of buying at international prices, which are higher than those associated with domestic DAP production.

The NBS also reduces the risk of importers passing incurred expenses down the distribution chain to farmers, which could result in increased retail prices.

Despite a seasonal low demand period in India, the decline in DAP prices has tempted importers to take advantage of cheaper spot cargoes and potentially achieve greater financial returns against the current NBS.

Around 140,000 spot tonnes of Saudi Arabian and Australian DAP have been purchased at $600617/tonne CFR and offers for fresh cargoes are at $570/tonne CFR.

The government decree prohibits spot cargoes of DAP as well as monoammonium phosphate (MAP), triple super phosphate and lower-grade DAP lite arriving after 31 January from moving into the domestic distribution chain until 1 April.

Market sources fear the move will undermine the weakened phosphates market, which was subject to a sharp downward correction at the end of last year, as suppliers scramble to sell DAP into other regions that have low demand.

“Blocking cargoes of DAP will limit exports to India,” said one producer. “These cargoes will have to be sold elsewhere and this will place pressure on export prices."

In the interim, the Indian parliament is expected to approve a government proposal to cut the current NBS for DAP by around 30% from Indian rupees (Rs) 19,763/tonne (€304/tonne, $401/tonne) to Rs14,050 to reflect the drop in spot prices.

The current contract price for DAP of $677/tonne CFR is due to be renegotiated during biannual talks due to start in the coming weeks and there will be pressure on suppliers to agree to a decrease on par with a reduced subsidy.

The budget for the next fiscal year, which commences on 1 April, is expected to be announced on 16 March.

($1 = €0.76. $1 = Rs49.31, €1 = Rs65.01)

For more information on phosphates and other fertilizers, please visit icis pricing fertilizers

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By: Karen Thomas
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