The Indian fertilizer industry is on a “wait and watch mode” after China has banned urea exports and is not in a hurry to secure supplies of any fertilizer. This may help prevent any global price rise as demand in India is one of the key factors that influence rates because of import dependence.

“Unlike in the past, this government is hand-holding domestic companies to negotiate deals with international suppliers and has been meeting the burden of price increase through subsidy, except in the case of potash,” an industry official said clarifying why there is no rush for import. He said that whatever has been imported and in pipeline can meet the demand of urea until mid-December and other fertilizers like DAP and MOP until December.

The main sowing window of rabi season is between October and December, though in case of some crops it continues until January. Farmers keep stocking fertilizers for rabi season from August-September.

May fuel other fertilizers rise

The industry official said since urea is completely controlled by the government, the industry is not worried. But a section of fertilizer companies fears that the Chinese decision may fuel a global price rise in DAP, Muriate of Potash (MOP), as during the 2021 ban. More clarity is expected next week as some countries such as the UK are pushing for a resolution against Russia during the ongoing G20 meeting in New Delhi, sources said.

Russian President Vladimir Putin recently forced Russia to withdraw from an earlier deal that allowed Ukraine to export grain through the Black Sea during the war. Putin has said it will not be restored until the global leaders agree to allow Russian exports of food and fertilizer.

Unlike 2021 when there was a real supply issue of fertilizers due to Covid pandemic, this time both China and Russia are keen to continue export and it makes a big difference, said a top executive of a fertilizer manufacturer.

Current CFR cost

In 2022, imported fertilizer prices (FOB) reached about $1,000/tonne from $280-300 and that in turn increased the government’s subsidy to ₹ 2.25 lakh crore in FY23 from ₹1.54-lakh crore in FY22. Against total sales of 58.54 million tonnes (mt) of urea, DAP, MOP and Complex (NPKS) recorded during FY23, the import was nearly one-third at 18.8 mt.

Currently, the CFR (cost and freight) price of imported urea is about $400/tonne, DAP about $560 and MOP $319 (negotiated rate).

According to a Bloomberg report, China has asked some fertilizer producers to suspend urea exports after which a few major Chinese firms have halted signing new export deals this month. But South Korea’s Finance Ministry Friday issued a statement saying it has confirmed that China has not implemented an official ban on shipments of urea, at the same time it also said that one Chinese chemical fertilizer firm has announced a plan to reduce its export.

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