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RCF’s plan to set up facilities in Africa has been delayed, as its partners do not believe that there is any commercial value in fertilisers
India’s largest fertiliser maker by capacity and revenue, Rashtriya Chemicals and Fertilizers (RCF) Ltd’s plans to set up facilities in the African continent have been stalled. RCF’s mining partner in South Africa doesn’t find commercial value in investing in the continent, due to drop in prices of diammonium phosphate (DAP), company officials said.
One of its major partners, Foskor, has had reservations in setting up these facilities owing to the drop in DAP prices, a senior official from RCF said.
RCF had planned to build a greenfield DAP and urea facilities in South Africa and Mozambique last year. Both plants were estimated to have cost Rs14,000 crore-Rs15,000 crore. Under the memorandum of understanding (MoU) between RCF, Foskor and South Africa's Industrial Development Corp (IDC), the companies were to produce about 1.1 million tonnes to 1.2 million tonnes per year of urea and about 600,000-700,000 tonnes per year of phosphate fertilisers at their Mozambique plant.
“The international fertiliser market is not conducive for heavy investments,” the RCF official said.
The fact that Foskor would have provided the raw materials like mineral and rock phosphate for its facilities would have made it much easier for the fertiliser company to produce DAP and urea. Also, a key advantage would have been its ability to source natural gas at a much lower cost.
"We are looking at Africa closely as there are abundant sources of minerals which need to be exploited. However, we will not be pushing this forward without Foskor by our side," the official said.
Another official tells us that the deal is also being delayed by both governments who have not agreed as to who would get majority of the produce. There is also an argument as to the distribution of natural gas in South Africa, which is a major feedstock for producing urea.
According to him, the issues related to each company’s stake in the project and the quantity of the produce to be shipped to India has lead to the current situation.
RCF had agreed to set up facilities there due to the availability of feedstock resources and strong demand in the country. According to the original plan, the company was to send the produce to India through ships from Port Mabuto, at Mozambique. RCF would have to import almost 90% of the finished products for its Indian market requirements as well as exports.