Chinese squeeze drives up DAP fertiliser prices, spurs West Asia reliance

It's the second-most-consumed fertiliser in India after urea but a significant portion is imported

China’s export restrictions are not just squeezing supplies of niche water-soluble fertilisers, they are a factor in mass market Di-Ammonia Phosphate (DAP) prices rising to almost $800 per tonne in June, the highest in the last few months.

 

High DAP prices could jeopardise the Indian government’s subsidy maths for FY26 and hurt the margins of companies importing such fertilisers (subsidies cover a significant part of DAP prices).

 

India imported around 4.6 million tonnes of DAP in FY25, according to industry sources. Chinese imports were 0.85 million tonnes, or 18.4 per cent, of that amount.

 

But in FY24, India imported 5.6 million tonnes DAP, of which China contributed 2.2 million (39.2 per cent). In two years, imports of Chinese DAP reduced by a massive 61.3 per cent.

 

DAP is the second-most-consumed fertiliser in India after urea and of the 10-11 million tonnes used annually, around 5-6 million tonnes are imported.

 

Moreover, India also imports phosphorus and ammonia needed for manufacturing DAP. Trade sources said a $10 per tonne increase in the price of imported phosphorus leads to almost $5 per tonne rise in finished DAP rates. A $30 per tonne increase in ammonia prices leads to $12 per tonne rise in finished DAP rates.

 

Traders said as DAP imports from China went down, India turned to companies in West Asia, particularly Saudi Arabia, to keep supplies intact. The Iran-Israel war and Tehran’s threats of closing the Strait of Hormuz has exposed a weakness in supplies, leading to sharp jumps in landed price of DAP. 

 

DAP was quoting at around $633 per tonne in January (Cost and freight inclusive) and increased to around $780 per tonne in June. Infact, from April to now, landed price of finished DAP in India has risen by almost $100 per tonne, trade sources said. 

 

Sources said in case of Water Soluble Fertilisers (WSFs) was being felt for quite some time and has now become more acute.

 

“Over the past four years, China has intermittently imposed restrictions on fertiliser exports —including specialty fertilisers —primarily by delaying or withholding CIQ (China's Entry-Exit Inspection and Quarantine) clearance. While earlier disruptions were short-term, the current halt is more stringent and appears to reflect a deeper, more sustained export control strategy since 2021,” said Rajib Chakraborty, national president of the Soluble Fertiliser Industry Association (SFIA).

 

India annually imports around 0.6 million tonnes of non-subsidised specialty fertilisers, such as WSFs, of which around 80 per cent comes directly or indirectly from China. Domestic production accounts for just about 10 per cent and the balance 10 per cent is sourced from other countries.

 

WSFs can be easily mixed in water and used through drip irrigation or sprinklers. Such fertilisers don’t leave any solid material behind and are known to raise yields. However, WSFs’ usage growth has been slow in India due to their high costs compared to conventional fertilisers.

 

One kilogram of a conventional fertiliser costs around Rs 5 to Rs 6, but a kilogram of WSF costs around Rs 80 to Rs 100.

 

Dr Suhas Budddhe, policy advisor at SFIA, said that shortage of soluble fertilisers due to Chinese curbs is a serious threat to farm yield, quality, and profitability of horticulture and other high-value cash crops.

 

He said to mitigate the impact there is a need for investment, handholding, and market access support for Indian startups working on specialty fertiliser technologies.