Phosphoric acid surplus unlikely to benefit India

May 27, 2012: Phosphoric acid, a key input for fertilisers, is expected to see surplus production globally by 2014. Global phosphoric acid production capacity is forecast to increase by 4.5 million tonnes to 55.5 million tonnes between 2011 and 2014, according to International Fertiliser Association (IFA) data. This will result in a moderate production surplus of 2.7-3.5 million tonnes per annum between 2012 and 2014. However, approximately 85 per cent of world phosphoric acid production is for captive consumption and only 15 per cent is traded in the international market. Hence, Indian producers may benefit only to a limited extent from this trend. Out of the total trade of approximately 5 million tonnes of phosphoric acid, India imports more than 2.5 million tonnes every year. However, phosphoric acid is not freely traded and more than 50 per cent of Indian transactions are by way of long-term supply arrangements between producers and importers. As such, if India wants to ensure phosphoric acid availability through imports, companies need to participate in more production joint ventures in countries rich in the resource and forge long-term supply arrangements. Expansion in China will account for one-third of the increase in production capacity of this vital fertilier input. Close to 34 new acid units are planned for completion during the 2010-2015 period, of which 15 would be located in China, six in Morocco and three in Saudi Arabia. On a global basis, the net addition to merchant grade acid capacity is estimated at 1 million tonnes of phosphoric acid, of which 0.86 million tonnes will come from two large standalone units in Tunisia and Jordan. Indigenous production of phosphoric acid remained stagnant during the 11th Plan period (2007-12), with 1.16 million tonnes of production in 2009-10, as against 1.33 million tonnes in the terminal year of the 10th Plan. The total installed capacity for indigenous production of merchant grade phosphoric acid is 1.76 million tonnes, suggesting that domestic capacity is not fully utilised, probably due to material availability.