Will India influence global DAP pricing in 2012?

Will India influence global DAP pricing in 2012?

6:39 AM, 5th April 2012
Will India influence global DAP pricing in 2012?

SINGAPORE: India is the largest importer of DAP 64 per cent (18/46/0) in the global market, importing nearly 50 per cent of the global trade. Strategically, it is a position to influence the global pricing. But on the other hand, the imports have put it in a dependent position as if sees lack of local production capacity.

“Since, India does not have adequate local production capacity it is dependent on international suppliers. It is the international suppliers that determine global prices as well as quantum of DAP available. During the season, such as July crop it is a hit and run situation, when price negotiations take place. This issue needs to be addressed by the government,” said P Karthikeyan, Chief General Manager, RCF Ltd.

There is a major requirement that government policies address the DAP market concerns. The provision of subsidy from the government is supportive as the price of DAP is not affordable for majority of the farmers. “Government policy makers should look at long term advantages. With a long term contract in place international suppliers will be assured of a profit. This will also bring relief to farmers,” said Karthikeyan.

On a different view, analysts and experts believe that India is definitely influencing the global DAP pricing and will do so in 2012. Due to the high price of DAP, farmers are increasingly using urea as an alternative resource. Also, for last year, the government policies supported the increased procurement of urea. Considering lower consumption, DAP imports for 2012 will be lower than 2011 levels.

“Many MNCs - raw material providers of DAP during their recent results suggested that India would import lower amount of DAP in 2012. And looking at India’s contribution in the global trade of DAP, we will impact the global pricing. The final pricing will be clear when the government announces the urea policy,” informed Manish Mahawar, Research Analyst, Prabhudas Lilladher (P) Ltd.

On a global level too experts have raised the question; in terms of global demand and market dominance as an importer, in 2012 will India be a price maker - and therefore exert some degree of monopoly price power - or will India be a price taker, and thus exert little global price influence.

“Given the role of Indian government in setting the import-price mechanism and other demand-supply factors, the CFR India price could range lower than the past six month’s global prices. And also relative compared to recent years,” felt Jerome Nugent-Smith, Australian Strategic Partner, Hedblom Partners Group and CEO & Director, Montreux Management Pty Ltd.

“Pricing of US$510-US$520 per M/T CFR India port might well be the negotiated result by major global suppliers. If so, this is likely to flow through not only secondary suppliers to India (and thus Indian importers) but also to global markets for the key demand DAP 64 per cent months of 2012. In summary, 2012 could well be the year that lower DAP 64 per cent (18/46/0) import prices bring major price benefits to Indian farmers. Either way, we will all not have to wait long: a decision is imminent,” added Nugent-Smith.

Thus, as suggested by industry experts and prevailing alternative options, India will definitely impact the global DAP pricing in 2012.

© WOC News



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