fertilizer prices to go further up

IRFAN MALIK
KARACHI - The recent move of China to increase export duty on DAP fertilizers would cause a further rise in the prices of DAP, as Pakistan mostly imports DAP from China, said a report.
China has decided to increase export duty on Di-Ammonium Phosphate (DAP) fertilizers to 35 per cent to secure fertilizer availability to the domestic market in the backdrop of surging food inflation and recent snow storms, curtailing the country’s power supply and limiting its DAP production.
It is expected that the next round of Chinese fertilizer imports may reach USD900/ton CFR from the current price of USD810-815/ton CFR, an international fertilizer publication said. Analysts said that currently in Pakistan DAP is being sold at Rs 2,000 per bag in some markets owing to shortage of supply by the importers.
It is expected that the soaring increase in prices of DAP and recent decision of china to increase the export duty of DAP would result in a lower off take for the product in the domestic market, while analysts were of the view that farmers probably switch from DAP to urea in the wake of china’s decision, which add fuel to the miseries of farmers. In Pakistan, DAP supply seems to be largely covered for the remaining Rabi season (341k tons ending inventory in Dec-07). DAP sales during the first quarter have remained historically low (10-yr average of 9 percent of full year DAP offtake), as most of the DAP is consumed during the wheat sowing period (4Q of the calendar year). However, fresh import orders are expected to pick up by early March on account of Kharif crops. According to Fertecon, ENGRO has purchased 30k tons of DAP at USD815/ton CFR, but there are also rumors of contracts being finalized in the range of USD890-900/ton CFR (Rs2, 800/bag landed cost).
Pakistan mostly imports it’s DAP from China, USA, and the Middle East. It may be noted here that farmers are incurring great hardship due to the soaring prices of DAP, since Dec. 2007, the local producers also increased urea prices by Rs.10-27 to Rs.565 per bag.
The domestic production of DAP is only 30 percent, while 70 percent is being imported mainly from china.