24 JUL, 2012, RITURAJ TIWARI, ET BUREAU
NEW DELHI: A sluggish demand due to weak rains and drought-like conditions may soften global prices of fertilisers such as di-ammonium phosphate (DAP) and potash. Urea prices have melted by 20% from $525 per tonne to $406 per tonne in a couple of months.
"Fertiliser demand has fallen by almost 50%. We don't expect any rise in demand with muted rains in the crucial July month. This will affect the global prices of soil nutrients. Urea prices are already down by 20%. With no fresh contracts for DAP and potash, their prices too may drop in the next couple of months," said Iffco managing director US Awasthi.
DAP is being traded in international markets at $580 per tonne while potash is priced at $490 per tonne. Demand destruction is being felt more in DAP whose prices have doubled over the last season. DAP prices have gone up from 12,000 a tonne last kharif to over 18,000 a tonne and further revised to 24,000 just after the onset on this kharif season. This has forced farmers to use urea whose prices are still regulated by the government. Urea is available at 5,310 per tonne - almost at one-fifth the price of DAP.
"This will create an imbalance in fertiliser use, spoiling the health of the soil," said K Ravichandran, senior vice president and co-head of rating agency ICRA. According to Fertiliser Association of India, a trade body, the ideal ratio of nitrogen-phosphorus-potassium (NPK) should be 4:2:1 for a healthy soil structure. But in 2011-12, it was 10:4:1 in the country.
The skewed demand is likely to upset the quarterly results of fertiliser companies. "The industry is sitting on a high inventory. Due to poor monsoon, there is less offtake of soil nutrients. The first quarter is somewhat dull for fertiliser companies but they pick up in second and third quarters," he said.
Companies have taken a hit in the first quarter. There has already been a 10% dip in sales as the monsoon remained inactive during the whole of June and failed to gather pace in July. With chances of El Nino phenomenon, which affects rain patterns adversely, hitting India in August, fertiliser sales would be dull during the quarter.
NEW DELHI: A sluggish demand due to weak rains and drought-like conditions may soften global prices of fertilisers such as di-ammonium phosphate (DAP) and potash. Urea prices have melted by 20% from $525 per tonne to $406 per tonne in a couple of months.
"Fertiliser demand has fallen by almost 50%. We don't expect any rise in demand with muted rains in the crucial July month. This will affect the global prices of soil nutrients. Urea prices are already down by 20%. With no fresh contracts for DAP and potash, their prices too may drop in the next couple of months," said Iffco managing director US Awasthi.
DAP is being traded in international markets at $580 per tonne while potash is priced at $490 per tonne. Demand destruction is being felt more in DAP whose prices have doubled over the last season. DAP prices have gone up from 12,000 a tonne last kharif to over 18,000 a tonne and further revised to 24,000 just after the onset on this kharif season. This has forced farmers to use urea whose prices are still regulated by the government. Urea is available at 5,310 per tonne - almost at one-fifth the price of DAP.
"This will create an imbalance in fertiliser use, spoiling the health of the soil," said K Ravichandran, senior vice president and co-head of rating agency ICRA. According to Fertiliser Association of India, a trade body, the ideal ratio of nitrogen-phosphorus-potassium (NPK) should be 4:2:1 for a healthy soil structure. But in 2011-12, it was 10:4:1 in the country.
The skewed demand is likely to upset the quarterly results of fertiliser companies. "The industry is sitting on a high inventory. Due to poor monsoon, there is less offtake of soil nutrients. The first quarter is somewhat dull for fertiliser companies but they pick up in second and third quarters," he said.
Companies have taken a hit in the first quarter. There has already been a 10% dip in sales as the monsoon remained inactive during the whole of June and failed to gather pace in July. With chances of El Nino phenomenon, which affects rain patterns adversely, hitting India in August, fertiliser sales would be dull during the quarter.
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