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Operating rates of phosphate fertilizer manufacturers are set to rise; markets in Brazil and India perform better than expected. Author/Source: Date: 2019-11-14 Clicks: 33 China, India, the United States, and Brazil are the main countries that demand phosphate fertilizers, accounting for about 67% of global consumption. At present, on the supply side, the expansion of phosphate fertilizer production capacity has essentially come to an end, while on the demand side, the markets in Brazil and India have performed better than expected. The strong global demand has directly driven an increase in China’s phosphate fertilizer exports, and the phosphate fertilizer market is expected to experience new prosperity. Supply side: Capacity expansion is essentially complete. Following the sharp price drop in 2013, phosphate fertilizer prices continued to fall during the first five months of this year. The decline in product prices also led to a shrinking price gap, resulting in a situation across the industry characterized by continuously declining gross profit margins, significant drops in profits, and severe losses. Although China currently has 830,000 tons of phosphate ammonium production capacity under construction, with a planned capacity of over 2 million tons, the expansion of this capacity has progressed slowly due to the deterioration of the industry situation in the past two years. CITIC Securities predicts that in 2014, China’s production capacity for monoammonium phosphate will be around 17.72 million tons, while that for diammonium phosphate will be around 18.65 million tons – with little increase compared to 2013. In 2014, the proportion of factories shifting to other activities due to parking issues was higher than expected, and the actual effective production capacity might have been lower than anticipated; thus, a process of reducing production capacity gradually set in. On the demand side: Markets in Brazil and India performed better than expected. According to statistics from the General Administration of Customs, from January to June 2014, China’s exports of diammonium phosphate amounted to 1.2725 million tons, a 145.82% increase compared with 517,600 tons in the same period last year. Of this amount, 72,000 tons were exported to Latin America, which is 5.6 times the volume exported in 2013 as a whole; 260,000 tons were exported to India, representing a 49% increase on a year-on-year basis. In the first half of the year, the continuous growth in demand in Latin America, represented by Brazil, served as a strong driving force behind the rapid expansion of China’s exports. Meanwhile, the improvement in the supply landscape in the Americas resulting from the integration of phosphate fertilizer production assets between Mosaic Company, the world’s largest phosphate fertilizer producer, and CF Industries Group created more opportunities for Chinese companies that offer good value for money. Galaxy Securities expects that the favorable export situation for phosphate ammonium in China is likely to continue, with exports expected to rise to 5 million tons this year. Fundamentals: Global phosphate fertilizer capacity utilization is set to rise. Over the next 10 years, the yield growth of phosphate-demanding crops will be faster; Galaxy Securities predicts that global phosphate demand will grow at a compound rate of 2.0%-2.5% over this period. The planned and intended phosphate projects in Morocco and Saudi Arabia were concentrated in the 2016–2017 period, with fewer new projects added during 2013–2015. Taking into account factors such as the construction speed of the facilities, their commissioning timelines, and operational capacity, the pace at which production capacity is brought online is lower than expected. Based on an assessment of global phosphate demand and supply, it is expected that the world’s phosphate production capacity utilization rate will remain around 85% during the period 2014–2020, with an upward trend in this utilization rate from 2014 to 2016. The global phosphate fertilizer market is set to enter a favorable phase. www.southmoney.com Investment Advice Galaxy Securities believes that the supply and demand situation for phosphatic fertilizers globally has improved over the past two years, with production rates set to rise gradually. The strong global demand has directly driven an increase in China’s phosphate fertilizer exports, while the expansion of domestic production capacity is nearing completion; as smaller production facilities gradually withdraw from the market and shift to other activities, the phosphate fertilizer industry is likely to experience new periods of prosperity. Pay special attention to Yuntianhua (market data, inquiries), Liuguo Chemical (market data, inquiries), Xingfa Group (market data, inquiries), Xinyangfeng (market data, inquiries), Sierte (market data, inquiries), and Hubei Yihua (market data, inquiries). (People’s Securities News) Yuntianhua is one of China’s top 100 listed companies, as well as an outstanding producer of copolymerized formaldehyde and a leading manufacturer of glass fiber on a global scale. Focusing on four key business areas – fertilizers, organic chemicals, materials, and trade logistics – the company actively promotes strategic transformation and industrial upgrading through methods such as technological upgrades, new project development, equity participation, and joint ventures. As a result, it has established four industrial clusters, with over a dozen major member companies. In the future, the company will make full use of its existing industrial resource advantages, and in line with the principles of sustainability, low carbon emissions, health, and safety, it will focus on developing emerging industries such as new materials and new energy. It will establish interactive platforms for research and development, manufacturing, commerce, and capital, actively explore innovative development models that foster positive interaction between industry and capital, expand its business scope, and strive to turn itself into a high-tech, high-growth, high-value-added listed company with extensive involvement in emerging industries. LiuGuo Chemical Industry is primarily engaged in the mining and processing of phosphate rocks, as well as the production and sales of phosphate fertilizers, fine phosphate chemicals, synthetic ammonia, and methanol. The company holds two well-known Chinese trademarks, namely “LiuGuo” and “Shi Dazhuang”; it is the only ammonium diphosphate manufacturer in the country to possess two such trademarks. “The “Liu Guo” brand of diammonium phosphate has been awarded titles such as China’s Famous Brand Product and National Product Satisfaction Award; the “Liu Guo” trademark is among the top 500 most valuable trademarks in China, and it is one of the ten iconic brands in Anhui Province. In the future, the company will continue to strengthen and consolidate its position in the domestic market for phosphorus-based fertilizers, upgrade the quality of its products, and expand production capacity. It will utilize advanced technologies to extend the industrial chain and vigorously develop coal chemical industries. The company will also adjust its industrial structure, increase the technological content of its products, make full use of the advantages of sulfur and phosphorus resources, and develop industrial-grade and food-grade phosphoric acid. Further efforts will be made to develop electronic-grade phosphoric acid as well as high-quality phosphate products. The company will actively promote a circular economy model, with a focus on the recycling of fluorine resources. It will also pursue an internationalization strategy, enhancing cooperation with world-class enterprises, and strive to create an industrial framework centered on phosphorus chemistry, with rapid development in coal chemistry and fluorine chemistry as well. Xingfa Group is a listed company whose main business involves the development, production, and sales of phosphorus chemical products as well as fine chemical products. The main business includes the production and sales of phosphate products such as sodium tripolyphosphate and sodium hexametaphosphate. The company is China’s largest producer of fine phosphates and the world’s largest producer of sodium hexametaphosphate. It has established strategic partnership relationships with international chemical giants such as Procter & Gamble, Henkel, and Unilever, all of which are part of the Fortune 500 list. The company has been recognized as a **-level high-tech enterprise; its technology center has been designated as a **-level enterprise technology center, its testing center has been recognized as a **-level laboratory, and Xingfa Group’s Yichang Chulin Industrial Park has been established as a **-level innovation base for promoting trade through science and technology. The company has made significant breakthroughs in its independently developed technology for the comprehensive utilization of dimethyl sulfoxide waste salts and sodium hexametaphosphate polymerization exhaust gases, and has been awarded the title of Model Enterprise for Scientific and Technological Innovation in China’s chemical industry.