Fertilizer firms ride high demand to up DAP output

0

HYDERABAD: International prices of DAP , the second most widely used fertiliser in India, have nearly halved in five years due to a fall in the price of inputs, mainly phosphoric acid and rock phosphate.Analysts said that the price drop, coupled with increasing awareness among farmers about soil health and a moderate increase in the minimum support price (MSP) for certain crops, is fuelling demand for the fertiliser across the country .

Krishak Bharati Cooperative (Kribhco), the country’s second-largest urea producer, is setting up a $230-million joint venture with Morocco-based OCP to produce DAP at Krishnapatnam in Andhra Pradesh.

Some of the other companies adding capacity are Deepak FertilizersBSE -2.08 %, which is investing `800 crore to augment capacity of complex fertilisers and Coromandel InternationalBSE 1.00 %, the country’s largest private sector phosphatic fertiliser producer that is adding phosphoric acid capacity at an outlay of Rs 225 crore.

Rating agency India Ratings said DAP production is expected to touch a five-year high of 4.2 million tonnes in the current fiscal from 3.6 million tonnes in 2012-13.

According to Niraj Rathi, associate director at India Ratings, global DAP prices have fallen from nearly $600 a tonne in December 2011 to $300 in December 2016. Also, the domestic prices of raw materials, mainly phosphoric acid and rock phosphate, fell from about Rs 800 a tonne in August 2015 to Rs 120 in December 2016.

“This fall in price is fuelling the production of DAP . The fall in raw material prices was mainly due to political stability returning in top supplier Morocco and also due to a supply glut of DAP globally,“ Rathi said.

DAP accounts for about 28% of the fertiliser produced in India. It is the second most widely used fertiliser after urea, which holds over 50% share in total production.

“The significant fall in raw material prices have led to an improvement in profitability for fertiliser manufacturers, which in turn resulted into higher domestic manufacturing,“ said K Ravichandran, senior vice-president at rating agency IcraBSE 0.24 %, adding that the DAP industry was set to post a growth rate of 9% this year, up from about 5% five years ago.