Material Insights · Understanding the Material World

Ammonia and DAP and MAP

Ammonia supplies all the nitrogen in DAP and MAP, so phosphate fertiliser costs carry an ammonia price on top of phosphoric acid. India imports finished DAP and much of the ammonia and acid to make it, so ammonia shocks reach Indian farms through the subsidy.

Ammonia (chemical) and DAP and MAP (chemical): 4 relationships.

How they are linked

1. Nitrogen source

Physical flow · Strong · Ammonia to DAP and MAP

DAP and MAP are made by neutralising phosphoric acid with ammonia, which provides all of their nitrogen.

  • 18% minimum nitrogen in DAP, grade 18:46:0
  • about 70% of world ammonia used for fertilisers
  • 97% of nitrogen fertilisers derived from ammonia

An 18% nitrogen content means about 0.22 t of ammonia in each tonne of DAP (0.18 x 17/14), roughly a fifth, alongside the phosphoric acid that carries the 46% phosphate. At Indian import prices in May 2018 that was about USD 65 of ammonia against about USD 335 of phosphoric acid per tonne of DAP, so ammonia is the smaller input by mass and value, but a phosphate producer without its own ammonia plant must buy it on a thin merchant market.

Sources: IEA; European Commission (IPPC Bureau); Gujarat State Fertilizers and Chemicals Ltd; Argus Media

2. Price link: input cost

Cost and price · Strong · Ammonia price feeds DAP cost

Ammonia is a direct cost in every tonne of DAP, and both prices respond to gas costs and to farm demand for nitrogen and phosphate.

  • 0.37 monthly change correlation, DAP with a US nitrogen fertiliser price proxy
  • 0.74 12-month change correlation, same series
  • 1.13 fitted elasticity

The link is strong over a year. Producers who buy ammonia are squeezed when input costs rise faster than DAP: in May 2018, with ammonia at about USD 298 a tonne cfr India and phosphoric acid at USD 730 a tonne of P2O5, Argus estimated that making DAP in India lost about USD 39 a tonne at the prevailing retail price and subsidy, before a GST refund.

Sources: Material Insights (World Bank, FRED, IMF data); Argus Media

3. Import dependence

Shared risk · High in India · India imports both

India lacks enough phosphate rock and cheap gas, so it imports finished DAP and also much of the ammonia and phosphoric acid used by domestic DAP plants.

  • 55.67 lakh t DAP imported by India, 2023-24
  • about 10% of world ammonia production exported

Because only about a tenth of world ammonia is traded, a few export plants set the price that Indian DAP makers pay, and an outage or sanctions on a large exporter tighten supply quickly. India imported 44.19 lakh tonnes of DAP in 2024-25 to February, after 55.67 lakh tonnes in 2023-24.

Sources: IEA; Argus Media; The Week (PTI)

4. Nutrient Based Subsidy

Policy · High in India · Ammonia cost sets DAP subsidy need

India pays fertiliser companies a subsidy on DAP and other phosphate and potash fertilisers at nutrient rates notified each season, so when ammonia and acid costs rise the rates must be raised or producers lose money.

  • Rs 37,952 crore budgeted NBS requirement for rabi 2025-26

The rabi 2025-26 rates apply from 1 October 2025 to 31 March 2026, and the government cited international price trends for fertilisers and inputs in setting them. When input prices rise faster than the rates, domestic production can become loss-making, as the 2018 Argus calculation showed.

Sources: Argus Media; Prime Minister's Office, Government of India

For investors

Key learnings

  1. DAP margins for non-integrated producers are a spread over ammonia and phosphoric acid; DAP prices correlate at 0.74 over 12 months with a US nitrogen fertiliser price proxy.
  2. Only about 10% of world ammonia is exported, so a few merchant suppliers set the marginal cost for phosphate makers without their own ammonia.
  3. Indian DAP makers' earnings depend on whether seasonal NBS rates keep pace with imported ammonia and acid prices.

What to track

  • Ammonia price, Tampa or Middle East: A rise squeezes DAP makers that buy ammonia (Monthly · World Bank Pink Sheet, trade press)
  • DAP price less ammonia and phosphoric acid cost: A narrowing spread signals output cuts by non-integrated plants (Monthly · trade press)
  • NBS rates per kg of nitrogen and phosphate: Higher rates restore margins and imports; lags signal shortages (Each season · Department of Fertilizers)

For policymakers

Key learnings

  1. India's DAP supply depends on imported ammonia and acid as well as imported DAP, so diversifying ammonia sources matters for phosphate security.
  2. Because NBS rates are set per season, sharp ammonia price moves within a season fall on producers, whose margins can turn negative.
  3. Long-term ammonia offtake contracts, or domestic low-carbon ammonia, would reduce exposure to a thin traded market.

What to track

  • DAP imports and opening stocks: Low stocks before sowing seasons signal shortage risk (Monthly · Department of Fertilizers)
  • Ammonia imports by source country: Concentration on one source raises disruption risk (Monthly · Ministry of Commerce trade data)
  • NBS subsidy outgo against budget: Overshoots show input price shocks reaching the budget (Monthly · Controller General of Accounts)

India

India imported 55.67 lakh tonnes of DAP in 2023-24, and its domestic DAP plants also rely on imported ammonia and phosphoric acid. India made about 8% of world ammonia in 2019.

Sources

  1. Price correlation, Material Insights, Material Insights (World Bank, FRED, IMF data)
  2. Ammonia Technology Roadmap, IEA (2021)
  3. Reference Document on Best Available Techniques for the Manufacture of Large Volume Inorganic Chemicals: Ammonia, Acids and Fertilisers, European Commission (IPPC Bureau) (2007)
  4. Di-Ammonium Phosphate: specifications, Gujarat State Fertilizers and Chemicals Ltd
  5. Analysis: India's DAP market in no-win situation, Argus Media (2018)
  6. India imports 44.19 lakh tonnes DAP till Feb of FY25 against 55.67 lakh tonnes in full FY24, The Week (PTI) (2025)
  7. Cabinet approves the Nutrient Based Subsidy rates for Rabi 2025-26 on Phosphatic and Potassic fertilizers, Prime Minister's Office, Government of India (2025)