Global prices of fertiliser raw materials dip

The rupee movement may not be favourable for fertiliser imports, but India’s position as the largest importer in the world has acted to its advantage.

With the declining orders from India, global prices of fertiliser raw materials, ammonia and phosphate, have started falling. Market sources said the demand for imports will slow down in the coming months due to slack domestic demand. Thus, the global prices will further subdue.

“India is a major driver of demand in the global market, given the current circumstances when the global demand is already very weak,” said an official source of a fertiliser company.

 

While urea is losing floor, ammonia prices came down by $50 a tonne from $625 a tonne to $575 a tonne in a month since November. Similarly, urea prices in global markets have been sliding and have fallen from $400-430 a tonne to $330-340 a tonne in a month. In mid-2011, urea prices had gone to a high of $550-610 a tonne. Other raw materials like nitrogen and phosphate are also moving southwards. In India, annual urea supply is 21 million tonnes, while the demand is 28 million tonnes. Diammonium phosphate (DAP) prices have come down from $627 a tonne to $575 a tonne.

Sources in fertiliser companies said the global outlook for all categories was bearish till the beginning of next year, as was evident from forward swap rates in the market.

However fertiliser companies have started sourcing from the local market. Companies said even if the quantity of raw material manufactured locally is more by one or one and half kg compared to that of the imported material, the price for the same quantity of raw material works out cheaper, even after accounting for the import cost with the rupee at 52-53 per dollar.

“Even at 53-54 per dollar, the ammonia cost will be $35,000-36,000 a tonne in the local market, while the landing cost of the same amount of ammonia still works out $40,000 a tonne,” said a company official. In November, Iffco got a discount of $35 a tonne and $25 a tonne in DAP and nitrogen phosphate potassium fertiliser, respectively, from suppliers.

Fertiliser is a highly import-dependent sector, where 70 per cent of the raw material is imported. While potash is completely imported, DAP is 70 per cent imported.

In India, DAP prices, which ruled at Rs 11,000 a tonne at the beginning of the kharif season in May-June, have shot up 65 per cent to Rs 18,500 a tonne at present. Since April 2010, when the government de-controlled non-urea fertilisers, prices of DAP almost doubled from Rs 9,350 a tonne.