Tired of Chinese moves, United Phosphorous to restart unit

Tired of Chinese domination of the phosphoric acid market, two of India’s largest private sector fertiliser and pesticide makers have decided to open new lines to source the raw material, which is essential in making phosphate-rich fertilisers and pesticides.

United Phosphorous Ltd, country’s largest pesticide maker, will reopen its Ankleshwar facility in Gujarat, which was closed down in 2008 after Chinese companies started ‘dumping phosphorus’.

The company maintains that its 3,000 tonne facility, like many other small home-grown players, was driven out of business as Chinese-made phosphorous was sold at “very low prices.”

Tata Chemicals, the country’s largest private sector fertiliser manufacturer, is also planning a 1 million tonne per annum (tpa) diammonium phosphate facility in Morocco. Once the company board approves the plan, Tata Chemicals expects the plant to be operational in three years.

Already, the company, along with Zuari Industries Ltd, has ‘offtake’ arrangements for phosphoric acid from Imacid, a joint venture between Morocco-based Office Cherifien des Phosphates (OCP) and Zuari and Tata Chemicals.

"We will be re-starting our plant soon,” said Rajju Shroff, chairman and managing director of United Phosphorus, declining to give a timeline by when the facility would be re-opened. He added that the company will still have to import some white phosphorus given that its demand is 7,000--8,000 tpa.

Phosphorus is a mineral found naturally as rock phosphate. Red and white(or yellow) phosphorus are just two of its kinds. While the former is used in fertilisers, white phosphorus is an integral raw material for explosives.

Going by Shroff, with phosphorus price rising globally, China has cut its cheap exports to India.

Since January 2010, phosphoric acid prices have shot up from $610 a tonne to $780 a tonne in January this year.

India is one of the largest consumers of fertilisers. However, it meets a large part of its requirement of phosphate-based fertilisers by importing raw materials including rock phosphate and phosphoric acid. The country imports 2.5 million tonne of phosphoric acid, with nearly 500,000 tonne coming from China alone. It also imports 5 million tonne of rock phosphate, according to the Ministry of Chemicals and Fertilisers.

According to PotashCorp, the world’s largest fertiliser company by capacity, 85% of total phosphoric acid produced is used in making fertilisers, with 9% used in food and industrial sectors.

Phosphoric acid is produced from phosphate rock. Global production of phosphoric acid in 2010 was estimated at close to 37 million tonne — an increase of 3.4 million tonne over 2009 — according to International Fertiliser Industry Association, a Paris-based not-for-profit organisation representing the industry.

Global phosphoric acid trade increased 9% from 2009 to 4.8 million tonne in 2010, with India accounting for half of the global trade.

Of the world’s total 161 million tonne of rock phosphate produced in 2009, China mined 55 million tonne — an increase of 8.5% from 2008 — thereby becoming thethe largest producer of rock phosphate, according to US Geological Survey January 2010. The country also has the second-largest reserves at 3,700 million tonne, behind Morocco and Western Sahara, which has reserves totalling 5,700 million tonne.

India produces 17.7% of global production of diammonium phosphate, imports 23.6% of global trade of it and consumes 28.1% of global consumption.

India imports 17.9% of global trade of rock phosphate, as the indigenous production is limited.

India’s indigenous production of phosphoric acid corresponds to 4.1% of global production and it imports a significant 54.4% of phosphoric acid of global trade. India’s consumption of phosphoric acid constitutes 11.7% of global consumption.

"Global phosphoric acid supply/demand points to an emerging tightness in 2011, as the potential surplus would decline to less than 1.7 million tonne,” warns the international fertiliser body.

Since, there are no substitutes for phosphorus in agriculture, Chinese dominance in producing raw materials essential for phosphate-based fertilisers has made fertiliser manufacturers jumpy.

"Globally, phosphoric acid prices are again moving up and this plant should help us,” said R Mukundan, managing director at Mumbai-based Tata Chemicals.

The news of Indian firms cutting their dependence on Chinese imports for phosphoric acid comes after last year’s international tensions over rare earth supplies.

Many Indian companies then decided to ramp up domestic production and struck cooperation deals with other governments which were worried about China’s clout in the rare earths game.

Shroff believes the country’s dependence on China for phosphoric acid would continue for a few years. “Even if we restart the plant, our capacity is only 3,000 million tonne and our own requirement is 7,000 to 8,000 million tonne. So we will have to continue to import more for our own captive consumption,” Shroff said.