It's boom time for urea exports

India could well export up to 5 lakh tonnes urea this year after the government further eases controls on trade. But the actual immediate gainers will only be a handful of low-cost producers like Tata Chemicals, Indo Gulf, NFL and RCF, as their cheaper feedstock makes them competitive in the current world market. The biggest opportunities will be in the south-east Asian countries, where freight savings will be an added advantage.
With world urea prices ruling at $200/t and India’s average price ruling at $170/t, there is plenty of scope for indigenous urea to move out. All urea manufacturers using gas as feedstock will have an edge because it is the cheapest option available today. Units using feedstocks like naptha, consequently, do not stand a chance. “It is an excellent way of making the industry more competitive because entering the world markets ensures upgradation of the entire organisation. Once more units convert to gas, the beneficiaries will increase in number,’’ said Mr Ajay Shriram, chairman of DSCL, and past president of the Fertiliser Association of India.
“Price will be the only criterion for trade, which is exactly how it should be. The only equation that needs to be worked out in the long run is India’s supply-demand balance,’’ he added.
Large multinational traders say another advantage would be better stocks management. “Indian companies can now export fertilisers in the off season and import later as Australia does for DAP very often. The nearest markets will certainly be ones India can best compete in,’’ they pointed out.
Industry watchers say one likely reason for opening urea exports is to pave the way for India’s obligation to import upto 1.5 mn tonnes urea from the Oman unit. “Ensuring that some urea also goes out will ease the glut that would otherwise occur,’’ they pointed out.
Meanwhile, despite liberalisation, there is unlikely to be much outgo of other fertilisers like DAP, SSP and MoP because India remains uncompetitive in these products. “Apart from being over-priced, India has had problems in the past with poor quality. The case of sub-standard SSP exports to Bangladesh, which led to a ban on India, is still fresh in everyone’s memories. So unless exporters can convince everyone about their quality, no serious quantities can move,’’ experts added.