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The launch of Guizhou’s phosphate production capacity – What will happen to the diammonium phosphate market? Author/Source: China Fertilizer Network Date: 2019-07-09 Clicks: 16 Diammonium phosphate, as a major type of phosphate fertilizer, plays an important role in agricultural production. China has abundant phosphate resources, which are concentrated in certain areas; the three main production regions are Guizhou, Yunnan, and Hubei, accounting for over 85% of the country’s total production capacity. Guizhou’s Kailin Group and Wengfu Group, as key players in domestic phosphate fertilizer production, have made outstanding contributions to China’s agricultural sector. On June 26, these two giants in China’s phosphorus chemicals industry merged, giving rise to Guipin Group. What impact will the completion of this giant aircraft carrier have on the domestic diammonium phosphate market? Guizhou Phosphorus Group was reorganized from Guizhou Kailin Holding Group; the shares of Wengfu Group held by the Guizhou State-owned Assets Supervision and Administration Commission and Guizhou Qiansheng State-owned Assets were transferred to Phosphorus Group, with Wengfu Group coming under the management of Guizhou Phosphorus Group. After the merger of the two phosphorus companies, they gained control of over 80% of Guizhou’s phosphate rock resources. Coupled with Wengfu Group’s world-class phosphate rock processing technology, this has lifted the utilization rate of phosphate rock resources in Guizhou to a new level. Regarding diammonium phosphate alone, after its establishment, Guipin Group gained a production capacity of 7 million tons, becoming China’s largest producer of this substance and ranking among the top producers in the world as well. As the largest supplier of diammonium phosphate in China, Guizhou Phosphorus Group will enjoy greater pricing power in the domestic diammonium phosphate market. The two phosphorus-related enterprises work together, leveraging the advantage that 1+1>2. Firstly, the combined entity will possess greater overall advantages; the reduction in raw material costs and management costs will help lower the production costs of diammonium phosphate, enabling it to offer more competitive prices and thus gain an advantage in both domestic and international competition. Second, the two can unify their prices, move forward and backward together, creating a combined force that reduces the costs resulting from internal competition. Third, the combined two phosphorus enterprises may eliminate outdated production capacity and improve the overall production efficiency of the company. For many years, the domestic DAP market has been characterized by an overall oversupply situation. According to China Fertilizer Network, China’s designed production capacity for diammonium phosphate is around 24 million tons per year, of which the capacity for long-term production is about 16 million tons per year. However, China’s apparent consumption of diammonium phosphate is 8 million tons per year, meaning that supply far exceeds demand. Domestic companies rely heavily on export markets to alleviate supply pressures, but with the commissioning of new production capacity abroad, inventory levels in key export destinations remain high. The offshore price of 64% diammonium phosphate in China has dropped to around $332–350 per ton, and some companies with high production costs are now experiencing losses. The emergence of large enterprises like Guizhou Phosphination, with output values in the hundreds of billions, helps to adjust the supply and demand dynamics across the domestic diammonium phosphate industry, playing a significant role in alleviating the pressure on domestic diammonium phosphate supplies. The emergence of Guizhou Phosphorus Chemical is yet another exploration by Chinese enterprises in their development process. Every move made by this giant enterprise not only affects the domestic diammonium phosphate market but also has a profound impact on the entire phosphorus chemical industry in China and around the world. I hope this aircraft carrier performs ever better, making greater contributions to China’s phosphate fertilizer industry and providing us with more and better phosphate chemical products. (Rong Guangwen)