A sharp increase in Di-Ammonia Phoshphate (DAP) production, aided by a fall in global phosphorus rates, pushed DAP production in September to almost 339,000 tonnes or 21 per cent more than in the same month last year. The prices of DAP, though, was hardly affected, being quoted at Rs 26,487 a tonne in September, marginally down from Rs 26,721 a tonne a year before.
Production of urea, the fertiliser whose production and consumption in India is the highest, was a little above two million tonnes, higher by 10.3 per cent than in the same period last year. That of NPK, though, dropped 7.1 per cent, to 809,000 tonnes year-on-year.
Overall, in the first six months of 2019-20 (April 1-September 30) period), production of DAP was almost 22 per cent more than in the same period last year, while that of urea and NPK fell.
“Phosphoric acid, main raw material for making DAP, is available in abundance in global markets, leading to to a drop in its prices. Which is why companies have upped their production,” explained Satish Chander, director-general at Fertiliser Association of India (FAI).
He said DAP's global rate had softened from an average of $400-410 to $360-375 a tonne in a year.
Interestingly, the increase in production of DAP and urea hasn’t translated into higher sales for producers, leading to piling of inventory at both wholesale and retail levels. Sale of urea fell 0.5 per cent in the first six months of FY20 from the same period last year. DAP sale declined by 5.5 per cent. Muriate of Phosphate sale in those six months was down 17.8 per cent. NPK sale was down 9.5 per cent.
This has led to growing inventory, estimated as on Wednesday at 18.7 million tonnes (mt) across product categories (urea, DAP, NPK), of which 24 per cent or 4.5 mt was at the wholesale level and 37 per cent
However, sales are expected to pick up in the coming rabi season, as the monsoon has been good and sowing is expected to improve. “In the second half of 2019-20, we expect fertiliser production to grow by four to five per cent,” said K Ravichandran, senior vice-president at ratings agency ICRA. Chander says he, too, expects sales to pick up in the coming months; delayed onset of monsoon in some parts, he adds, had impacted sales in the kharif season.
In sum over the first six months of 2019-20, fertiliser production grew 1.1 per cent, down from 1.8 per cent during the same period last year. It was among four of the eight core sectors that grew in this period, the others being steel, electricity and cement.