Strong winds blow, causing chaos; diammonium remains stable as markets await developments

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Strong winds cause chaos; diammonium nitrogen fertilizers remain stable as markets await developments. Author/Source: China Fertilizer Network Date: 2019-08-20 Clicks: 40 The most talked-about topic these days is undoubtedly \"Lekima\" – this powerful typhoon, with winds of force 10, made its way from Zhejiang to Shandong, causing havoc wherever it passed. As a result, 12.884 million people in 9 provinces (cities) including Zhejiang, Shanghai, and Shandong were affected, 13,000 houses were destroyed, and 996,000 hectares of crops were damaged. The fertilizer market is in a state of chaos, just like after a typhoon: the prices of various major types of fertilizers keep falling. In some areas, the price of urea has dropped by around 100 yuan per ton. New orders for compound fertilizers are being processed slowly, with few transactions taking place. The price of diammonium phosphate continues to decline, and there is a strong tendency among end-users to wait and see. So, when will the price of diammonium phosphate stabilize in this turbulent fertilizer market during autumn? 　　First of all, demand remains in autumn. Market demand is a prerequisite for price stability. Since the end of the fertilizer market in spring, sales in North China have gradually caught the attention of phosphate ammonium manufacturers. However, due to poor international market conditions that hindered exports, these manufacturers were forced to reduce prices under the pressure of their own supply issues. Although several domestic companies have successively announced measures to limit production, this has not changed the overall downward trend in the price of diammonium phosphate since the end of the spring planting season. Most distributors are adopting a cautious attitude. According to a survey by China Fertilizer Network, the stock levels of diammonium phosphate in North China remain insufficient, and most distributors have not yet begun to stock up on fertilizers; as a result, there is still significant potential for sales of diammonium phosphate from the end of August to mid-September. 　　Secondly, the peak season for preparing fertilizer is about to begin. In the North China region, the period for using fertilizers at the grassroots level in autumn is early October. Taking into account the transportation involved in transactions between factories and distributors at various levels, the end of August and mid-September will be the peak times for purchasing diammonium phosphate in the autumn market. It is now mid-August, and the peak season is approaching rapidly. Yet the price of diammonium phosphate continues to fall; in some enterprises in Hubei province, the advance price for 64% diammonium phosphate at the time of production is now 2,360 yuan per ton. The top priority now is to stabilize prices in order to boost the confidence of downstream distributors in making purchases, and to fully unleash the autumn demand in the North China market. 　　Finally, the selling price dropped near the cost level. A surplus in domestic diammonium phosphate production has long existed; every year, Chinese phosphammonium phosphate manufacturers rely on exports during the off-season to alleviate the pressure on their supply. However, the international market conditions have been poor this year, with high inventory levels in the main import regions. International prices have continued to decline since the end of the domestic spring demand period. Taking June as an example, China’s export volume of diammonium phosphate was only 597,600 tons, which is nearly 350,000 tons less than the 940,000 tons exported during the same period last year. Although ammonium diammonium fertilizer manufacturers have recently implemented production restrictions to reduce output to some extent, the effect has been limited. Although prices have been falling continuously recently, the rate of decline is gradually decreasing, indicating that they are approaching the cost level of diammonium producers. According to statistics from China Fertilizer Network, the total cost of 64% diammonium phosphate for enterprises in Hubei is around 2,300 yuan per ton, while for enterprises in the southwest region it is around 2,200 yuan per ton. As current market prices are close to the cost level, companies are increasingly inclined to maintain higher prices. Considering the substantial demand expected in the market in the future, it is likely that there won’t be much room for further price drops. 　　In summary, over time, interest in diammonium nitrate has been increasing. As most traders have not achieved significant profits from selling diammonium nitrate in recent years, they plan to make their purchases before the market starts to pick up. It is expected that the peak purchasing period for diammonium nitrate this fall will be pushed back to September, and the overall price drop should not be significant compared to the current level. 　　(Rong Guangwen)