Importing Phosphoric Acid...........
HS Code: 28092010
Perennial demand and low domestic production promise a worthy business opportunity in imports of phosphoric acid. All an importer needs to do is play the volume game.
Heard the spiel about aerated drinks being harmful for your health? Well, one of the reasons you are advised to stay away from your soft drink is because they’re made using an inorganic acid called phosphoric acid. This acid is also used as a rust-inhibitor in anti-rust coatings of your car and in handy home cleaning products for your kitchen shelf. What’s more? Phosphoric acid also acts as a food additive or preservative in your favourite snack and dairy product.
On a larger scale, the use of phosphoric acid can be seen in the fertiliser industry, where it is used to manufacture complex compounds such as diammonium phosphate (DAP) and single super phosphate (SSP). But wait! We are not going to throw at you yet another advisory. Instead, we will bring to you what we do best – explore new avenues in foreign trade. When it comes to phosphoric acid, importers of this acid are definitely minting money.
Phosphoric acid is broadly categorised into two grades – merchant and food. The quality is decided by the amount of phosphorous content in the acid. For instance, a content of 54% phosphorus in merchant grade is considered good, while food grade phosphoric acid needs to have at least 65% of phosphorous.
Experts estimate that nearly 85% of the traded phosphoric acid is merchant or industrial grade, while the remaining 15% is used in the food industry.
The quantity of food grade phosphoric acid is smaller but offers a faster turnaround. Also, the demand has been growing year-on-year. According to industry estimates, the Indian processed food industry is expected to grow by 104% to reach $482 billion by 2020.
“Phosphoric acid is a secret ingredient in the food business.”
The demand for the merchant grade is also high. Importers are also excited about the Centre’s consistent focus towards the agriculture sector. A report by TechSci Research highlights that by 2021, the market for phosphoric acid in India will grow by 7.2%. And that should be good news for importers because our domestic production is unlikely to be able to meet our needs. Indian production of phosphoric acid is around 3.6% of the global production. Meanwhile, import of the product corresponds to roughly 44% of total global trade. And that says it all.
Currently, Rajasthan State Mines & Minerals Limited and Gujarat State Fertilizer & Chemicals Limited are the only major domestic entities involved in the production of phosphoric acid and are catering to India’s domestic demand. As a result, India has consistently been the largest importer of this acid in the world. Imports in FY2016 (2.18 MMT) saw a jump of 21.85% over FY2015 (1.79 MMT). This clearly highlights the imbalance in demand and supply. How will India able to meet this shortfall?
According to Ministry of Commerce data, during the first three quarters of FY2017 (April-December 2016), India’s imports of phosphoric acid reached 1.99 MMT. The data also reveals that most of India’s demand is met by imports from Morocco, a country that has been the largest exporter of phosphoric acid to world. In fact, in FY2016, 47.26% of India’s total imports were from Morocco. Other top exporters to India during the same period included Jordan (317 MT), Senegal (247 MT) and US (178 MT), etc. In fact, the North African country commands a premium on price and owns nearly 70% of the world reserves of rock phosphate.
Interestingly, there are also importers who import huge quantity of rock phosphate (the raw material for phosphoric acid) and locally produce the acid. And even for that account, Morocco has been India’s largest sourcing country. In FY2010, India’s imports of rock phosphate from Morocco were 472,619 MT, worth $55.88 million. The number increased to 1.39 MMT in FY2016, which was worth $211.32 million.
"Morocco owns nearly 70% of the world reserves of rock phosphate"
For Merchant - One way to earn a higher margin is to buy in bulk from morocco, stock and sell when the demand in high in local market.
Moreover, there are several countries that have recently forayed into the mining business of phosphates. Further, countries such as Australia, Togo, Nigeria, Gabon and Ethiopia remain untapped for now. Additionally, many Western African countries, where business was marred due to political turmoil, have now become stable and are looking out for new opportunities. With new sources opening up and the demand for phosphoric acid only going up in India, importers will continue to rule the roost. Perhaps, a short-business trip to a few of these countries would really help importers. Who knows, you might hit a jackpot. Go, explore!