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This was the situation before the New Year; what should be done with diammonium phosphate after the New Year? Author/Source: China Fertilizer Network Date: 2020-01-13 Clicks: 82 As the Spring Festival approaches, all industries are in the process of summarizing their work for the year. Social media is filled with posts showing off company parties and year-end bonuses, while my colleagues in the fertilizer industry are still working hard to capture the last opportunities in the market before the Spring Festival. After a year of turmoil, diammonium nitrate has completely disappointed both suppliers and end-users, and the current sluggish winter storage market is the best indication of this. Since the winter storage market started in mid-to-late October, the price of diammonium phosphate has followed a steady downward trend, just as it did in the autumn market. The premium price for 64% diammonium phosphate in Heilongjiang Province has dropped from 2600 yuan per ton to the current level of 2420–2450 yuan per ton. Although all transactions come with minimum guarantee policies, local distributors avoid purchasing diammonium phosphate altogether; as a result, by early January, the volume of diammonium phosphate delivered to the Northeast region was only about 20-30% of the level seen in the same period last year, which is far below that figure. Most industry insiders remain pessimistic about the diammonium market, and discussions are currently focused on what actions should be taken after the New Year. At the downstream level, purchases are made as needed, with an appropriate level of inventory kept. The price of diammonium is less volatile compared to urea, but its unit price is higher; the risk associated with winter storage remains significant. Especially with the market still showing a downward trend, it is undoubtedly a smarter choice for dealers to opt for the secure back-to-back approach in order to avoid operational risks. Another point is that this year’s Lunar New Year arrived earlier than in previous years, leaving dealers more time after the festival to stock up on fertilizers. Therefore, there’s no need to rush if they haven’t yet stocked up; they can prepare an appropriate amount based on their own needs. At the factory level, production is restricted to stabilize prices while waiting for opportunities. Supply and demand are always the two opposing forces at play in the market. Currently, the domestic winter storage market is facing an oversupply; companies are constantly reducing prices in an attempt to alleviate their supply pressures. As a result, downstream distributors are even less willing to purchase goods given these falling prices, thus creating a vicious cycle in the market. The situation of overcapacity will not improve significantly in the short term, so limiting one’s own production is the only option left. According to China Fertilizer Network, some factories have stopped production for maintenance since January, which will lead to a reduction in overall supply. Since its inception, prices in the winter storage market have been falling continuously, which naturally does not sit well with downstream distributors who tend to buy when prices are high and avoid buying when they are low; as a result, the market has reached a stalemate. Market demand in spring will eventually pick up, and factories will stabilize their sales strategies while reducing production, waiting to make a big push once the spring market arrives after the New Year. Finally, pay attention to the impact of the international market and other factors such as freight costs on the diammonium market. Firstly, although the production cuts by Morocco’s OCP and the U.S.-based Mosaic Company have had a limited impact on international prices at present, the international market still needs to be vigilant; should export conditions improve, even if only in terms of an increase in export volumes, this would represent good news for diammonium fertilizers. Secondly, there has been a lot of talk in the market about rising railway freight costs for enterprises in the southwestern region recently. Although there is no official confirmation, some factories have reported that the freight costs have increased by between 50 and 80 yuan. The business of chemical fertilizers is not easy these days; the market before the New Year is coming to an end, and after the New Year we will enter the spring market. For many distributors, this means determining their profits for the year, so we need to keep an eye on the developments of the manufacturers as well as the overall trend of the market. (Rong Guangwen)