Asia, Fertilizers, News, Phosphate

Indian Fertilizer Manufacturers Facing Slowdown in Demand

India’s fertilizer producers have started to feel the piecemeal slowdown in demand as sales of more complex fertilizers, such as NPK fertilizers or diammonium phosphate (DAP), went down by 2 percent last month. Many companies, such as Gujarat State Fertilizer and Chemicals Ltd, Rashtriya Chemicals and Fertilizers Ltd and Tata Chemicals Ltd, have recently seen a drop in the sales of complex fertilizer volumes.
Moreover, the fertilizer industry is still importing a lot, as imports rose 13 percent in August and overallsoared by 54.5 percent in the first eight months of this year. Compared to the increased imports, volumes of locally produced complex fertilizers rose just 3 percent to date.Due to expensive phosphoric acid, Indian companies find it easier and more suitable to import DAP rather than produce it at home. As phosphoric acid is very important for the production of DAP, its imports went up by 30 percent in August.
Although the current situation is beneficial for traders, it could put pressure on the margins of the domestic producers, whose cost of production is higher. “With DAP prices remaining weak at $460/mt (metric tonne), imports will continue to put pressure on manufacturers’ margins in the near term,” B&K Securities explained.In case the current scenario does not improve, the industry will benefit from inventory normalization only in a limited way. The inventories of complex fertilizers went down after a long time, as a result of which the dealer credit period was shortened. This in turn improved cash flows towards the end of the previous fiscal year opening up more space for sales, competition from imports, which could put the Indian producers on the back foot.

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