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A dismal 2019: What is the future for diammonium? Author/Source: China Fertilizer Network Date: 2019-11-04 Clicks: 297 It is now early November, and the fertilizer market this year has only the winter storage option left. Compared to the volatile prices of other types of fertilizers, the price of diammonium phosphate has been on a downward trend. As the most important sales period of the year, the winter storage market holds great expectations for the entire fertilizer industry. However, this year’s winter storage market has failed to get off the ground; overall prices remain uncertain, and specific policies have yet to be introduced. It is understood that currently, the advance pricing for 64% diammonium phosphate at the main distribution points in Heilongjiang is 2,500 yuan per ton (the same unit is used throughout), while the price for picking it up directly at the ports for 57% diammonium phosphate is 2,100 yuan or slightly less. These prices are 300–400 yuan lower than those in the same period last year. Yet even such low prices have failed to attract orders from downstream clients, with most distributors remaining on the sidelines. So where lies the vitality of diammonium? Firstly, demand is still far off, and confidence in building inventory buffers is low. After the autumn market closes, companies, as in previous years, shift their focus to the winter storage market, but this year the winter storage market has started off particularly slowly. Reason 1: Some traders still have leftover stock from last year, and coupled with the low profits generated from winter stockpiling in recent years, downstream distributors are not very enthusiastic about making payments ； Reason two: The overall environment in the fertilizer market this year is poor; recently, the price of urea produced by some manufacturers has dropped below the cost level. Rumors regarding large-scale contracts for potash fertilizers remain unresolved, inventory levels in ports remain high, and the policies related to winter stockpiling of compound fertilizers have not been clarified yet. The low profits from winter stockpiling over several consecutive years, coupled with the overall unfavorable market conditions, have led to a lack of confidence among downstream distributors in carrying out stockpiling during off-peak periods; as a result, the pace at which they make payments to purchase goods has slowed down. Secondly, there is a persistent surplus in supply, while demand is starting slowly. From January to September, China’s exports of diammonium phosphate amounted to 4.826 million tons, remaining roughly on par with the same period last year. However, the average price dropped by 40–50 dollars compared to the same period last year; as a result, it could no longer support domestic prices, and could only help alleviate companies’ supply pressures in terms of volume. It is understood that the delayed rainy season in India has hindered the sales of diammonium phosphate; domestic inventory levels are as high as 6.2 million tons. Import demand was weak in the fourth quarter, and countries such as Pakistan have also reduced their purchases due to having received large quantities of diammonium phosphate at low prices earlier on. Demand in major export markets is approaching saturation, and negative factors affecting exports will remain dominant in the future; it is no longer possible to rely on export markets to support domestic prices, as was the case last year. Finally, costs are low, and there is insufficient price support. The diammonium industry is dominated by large-scale enterprises with a high degree of integration; these companies have a high degree of self-sufficiency in terms of raw materials, and cost accounting is complex. However, due to the shortage of sulfur resources in our country, the factor that has the greatest impact on the costs of diammonium phosphate manufacturers here is the price of sulfur. This year, inventory levels of sulfur at ports have remained high; in some ports, there were even situations where inventory levels exceeded capacity. Currently, inventory levels at sulfur ports have declined slightly, but they still amount to 2.2 million tons. The price of granular sulfur at the Yangtze River Port is around 590 yuan, and there are no significant factors that could drive up its price in the short term, so an increase is not expected. The price of liquid ammonia is also low; currently, the mainstream ex-plant price for liquid ammonia in Hubei is 2,750 yuan. With raw material prices at low levels, the cost of diammonium phosphate cannot be supported. Currently, the total cost of 64% diammonium phosphate for manufacturers in Hubei is around 2200 yuan, while that for large manufacturers in the southwest is around 2100 yuan. In summary, diammonium phosphate has remained in a weak state throughout the year; the winter storage market represents the last hope for this compound this year. However, downstream distributors lack confidence, and the imbalance between supply and demand along with insufficient cost support make it difficult for diammonium phosphate to see any improvement. Most manufacturers and distributors are waiting for specific policies or procurement measures to be introduced following the Qingdao phosphate compound fertilizer conference. (Rong Guangwen)