The Red Sea crisis: Imported fertilisers paint mixed price picture

The Red Sea crisis, precipitated by Houthi rebels of Yemen attacking ships, has pushed up freight charges for imported fertilisers, with trade sources saying the time taken to deliver the cargo has gone up.

Largely, di-ammonia phosphate (DAP) and muriate of potash (MOP), imported from Jordan and Israel, have been affected.

Also, freight charges of raw material from Russia and its adjoining countries like Belarus have gone up due to the alternative and longer route ships are taking due to the crisis.

Trade sources said freight rates had gone up from $20 per tonne to $30-40 per tonne.

Union Fertiliser Minister Mansukh Mandaviya recently said the annual fertiliser subsidy would remain within the FY24 Budget estimate of Rs 1.75 trillion and could have been lower had the crisis not erupted.

India annually consumes 30-35 million tonnes of urea, of which 4-5 million tonnes is imported, while the domestic consumption of DAP is 10-12.5 million tonnes, of which local production is 4-5 million tonnes and the rest comes from abroad. The data shows in FY24, between April 2023 and December 2023 (before the Red Sea crisis), the average landed prices of imported fertilisers and key raw material gave a mixed picture. While the landed price of DAP has risen from $568 per tonne in April 2023 to $587 per tonne in December 2023, that of urea has gone up from $333 per tonne in April 2023 to $402 per tonne in December 2023 (cost and freight inclusive).

The price of MOP has come down from $422 per tonne to $319 per tonne. In the case of key raw material, the price of landed phosphoric acid has come down from $1,050 per tonne in April 2023 to $985 per tonne while that of sulphur has reduced from $122 per tonne to $98 per tonne. Average spot ammonia rates, however, have gone up from $271 per tonne in April 2023 to $520 in December 2023.