India's low-priced DAP fertilizer to set benchmark

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India has bought 160,000 tonnes of crop nutrient diammonium phosphate (DAP) from China at the lowest price in more than six years in deals that could set a price benchmark for other buyers, sources said.

Indian Potash Limited, Paradeep Phosphates Limited and Chambal Fertilizers and Chemicals bought the crop nutrient at $410 per tonne on CFR basis in deals done last week, sources with knowledge of the deals told Reuters.

Prices paid by India, the world's top DAP importer, were as much as $520 per tonne in May.

The deals could encourage other buyers in Asia and elsewhere to seek cuts in prices of existing long-term contracts and delay signing of new contracts.

It would also put pressure on fertilizer producers from Russia, Canada and the Middle East to drop their DAP prices, at a time when they are already seeing lower prices of mineral fertilizer ingredient potash after the break-up of Belarusian Potash Co.

"India bought four cargoes for prompt shipments. They managed to reduce the price to $410," said a New Delhi-based official with a global DAP supplier. "Since there is a glut in supplies in the world market and India is delaying purchases, sellers have little choice but to reduce the price."

DAP is the most widely used phosphate fertilizer in the world. Phosphate-based fertilizers are most commonly used along with nitrogen- and potash-based fertilizers.

India relies on imports for most of its DAP needs and accounts for nearly half of the nutrient's annual global shipments of around 16 million tonnes.

The country has delayed and trimmed purchases in 2013 amid a build-up in inventories at suppliers. Last year it bought DAP at an average price of $580 per tonne.

The four cargoes are likely to land by the last week of September or early October, said an official with an Indian company that bought one cargo.

Retail demand for phosphate-based fertilizers increases in India from October to March. Indian companies usually buy large quantities of fertiliser ahead of the peak season.

Despite the price reduction, India is unlikely to increase purchases sharply in the next few months as the companies are struggling to dispose high-priced inventory from earlier purchases.

"Everyone is giving priority to sell old stocks that is sourced at a very high price. There would be few buyers, but they will also consider the weak rupee and reduction in fertiliser subsidy," said Ashok Ghasghase, director-marketing, at state-run Rashtriya Chemicals and Fertilizers Ltd.

The key DAP suppliers to India are Moroccan Office Cherifien des Phosphates (OCP), Russia's PhosAgro OAO, Potash Corp, Agrium Inc Israel Chemicals (ICL) and Mosaic Co.

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