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After the Phosphorus Fertilizer Conference: Diammonium Nitrate Prepares for Winter Stockpiling Author/Source: China Fertilizer Network Date: 2019-11-20 Clicks: 27 The phosphorus fertilizer conference held in Qingdao is coming to an end, with industry professionals gathering to discuss the policies related to winter stockpiling this year, which means that the winter stockpiling of diammonium nitrate is about to enter a new phase. Before the meeting, winter storage markets across various regions had already started operating, but due to fluctuations in raw material prices and supply and demand conditions, companies’ quotes kept falling. Downstream distributors tended to adopt a wait-and-see attitude, resulting in poor cash collection for these companies. However, as an important milestone in the winter storage market, the trends in this sector gradually become clearer after each year ends. This time, there are few positive factors, and how to operate in this downward trend has become a matter of concern for both suppliers and consumers. For diammonium phosphate manufacturers, this year’s market conditions are undoubtedly weak. The export market is in a downward trend, and domestic prices have continued to fall since the end of the spring market period. Numerous attempts at restricting production have failed to stop the decline in market prices; often, just after a meeting where a price is agreed upon, the market continues to drop based on that price. So how can diammonium phosphate manufacturers turn things around in the winter storage market? First, one must understand the mindset regarding inventory preparation on the downstream side. This year’s market situation for diammonium phosphate is very different from last year’s. The weak international market conditions and falling prices of raw materials such as sulfur have meant that diammonium phosphate manufacturers have much less confidence in setting prices this year compared to last year. This year, grain prices have been relatively low, leading to a decline in purchasing power at the grassroots level. Due to poor collections from downstream buyers, some major traders are reluctant to engage in winter stockpiling too early, and they increasingly demand guarantee policies. Therefore, it is particularly important to understand the inventory-accumulation strategies of downstream distributors. Secondly, start production ** and export in appropriate amounts. The winter storage market sees the highest volume of diammonium phosphate transactions of the whole year, and all diammonium phosphate manufacturers are gearing up to get busy. However, this year, international market demand has been weak, and the demand in the domestic off-season storage market has been slow to materialize. To maintain a balance between supply and demand in the market, several major DAP producers have implemented production cuts since the autumn market. According to China Fertilizer Network, the overall operating rate of the DAP industry remains stable at around 42%. Although the FOB prices are relatively low, some enterprises have still carried out a certain amount of exports, thereby alleviating the domestic supply pressure. Finally, a safety net policy is essential. The market trend has been downward, and most distributors lack confidence in purchasing goods. After all, over the past two years it has been common for prices to drop while the goods are still on the way in the fertilizer market. As a commodity with a relatively high unit price, diammonium phosphate poses greater financial pressure on distributors during winter stockpiling, which explains why they prefer to be cautious and wait before making purchases. For manufacturers, in order to accelerate the collection of payments, apart from setting an appropriate price, it is crucial to introduce guarantee policies to boost distributors’ confidence in buying their products. For dealers: First, it is necessary to have a thorough understanding of market conditions and corporate developments. In recent years, the market for fertilizers has been subject to constant changes; the era of making purchases on a monthly basis based solely on experience is now in the past. To avoid risks, dealers need to fully understand the company’s winter storage pricing, as well as the supply and demand dynamics in the overall market and its future trends, so as not to miss the optimal time to purchase goods. Second, one must have a certain level of risk resistance. The profits generated from winter stockpiling are relatively high; however, it takes a considerable amount of time for demand to pick up in the coming spring. Fluctuations in raw material prices and trends in the international market will undoubtedly affect prices next spring. Therefore, it’s essential to set realistic expectations in advance and stay vigilant regarding market changes. Market conditions are constantly changing, with various quotes emerging frequently. To avoid risks and achieve profits during the long winter storage period, it is necessary to keep a close eye on all developments in the fertilizer market. (Rong Guangwen)