India's phosphate imports far bigger than thought

18th Jun 2012, by Agrimoney
PhosAgro raised hopes for phosphate demand by revealing that India, the top importer, had signed off on purchases well beyond the 500,000-700,000 tonnes revealed by North American exporters.

India had in fact signed a "1m-tonne contract" at the start of the month, the Russian fertilizer group said.

And "contracts for over 2m tonnes have been signed since then", PhosAgro said.

The company declined to reveal further information on the contracts, although Agrimoney.com has learned separately of talk of India buying significant volumes too from China and Saudi Arabia's Ma'aden.

Such purchases will ease a major concern over the announcement by North America's PhosChem consortium at the start of the month of a 500,000-700,000-tonne deal - that it was short on quantity, if firm on price, at $580 a tonne.

'Indian demand recovering'

"Indian demand is recovering," PhosAgro said, adding that, with deals with much-watched Indian buyers sealed, it "does not expect any serious slowdowns" in the phosphate market.

Furthermore, demand from Brazil, Europe, Russia and the US was "strong", and with demand due to pick up soon in many markets ahead of the next autumn sowing period.

"The market will remain stable, especially considering recent development with Indian contracts," Maxim Volkov, the PhosAgro chief executive, said.

DAP vs NPK

A "challenging" Indian market had been one of the main setbacks to the phosphate market in the January-to-March quarter , the group said.

Demand from the top importer was sapped both by a weaker rupee and a cut of more than one-quarter, to 14,350 rupees a tonne, in government subsidies for diammonium phosphate, the main form of the nutrient in fertilizers.

The group, which prides itself on the flexibility of its production operations, side-stepped some of the weakness in phosphates by switching production to NPK, the compound, nitrogen, phosphate and potash fertilizer.

That helped phosphate revenues, including NPK, rise 9.0% to 23.0bn roubles.

One-off benefits

However, with spending on raw materials such as sulphur rising, and production in the group's nitrogen operations curtailed by factory refurbishment, group operating profits eased 1.7% to 7.53bn roubles.

While earnings rose 24% to 9.74bn roubles, this included a 1.8bn-rouble gain on currency hedges, and an 800m-rouble financing benefit.

PhosAgro depositary receipts, a proxy for shares, finished 2.1% lower at $10.15 in London.

The group made no further comment on its withdrawal last week from the tender for the Russian government's 20% stake in Appatit, the phosphate rock producer which PhosAgro already controls.

PhosAgro last week blamed its decision, which has forced the postponement of the sale, on "the fact that the tender organiser, BNP Paribas, has not disclosed or clarified several significant conditions of the tender".