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After the 50% rise, why is diammonium stuck in place? Author/Source: China Fertilizer Network Date: 2020-07-21 Clicks: 142 By mid-July, the diammonium phosphate market, which had previously enjoyed a favorable trading atmosphere, saw its momentum dampened significantly by this price increase, entering a period of calm. This week, aside from the delivery of orders placed at lower prices earlier on, there were very few new orders placed at higher prices. Various negative remarks are once again circulating in the market; could this increase of 50 yuan per ton really turn downstream distributors from happy to unhappy? Should we stock up on diammonium now? Should dealers whose low-priced orders arrived earlier ship them now? First, we need to take a look at what price level the diammonium compound is stuck at, and why it has stopped there Currently, the mainstream ex-plant price for 64% diammonium phosphate among enterprises in Hubei is 2,150–2,200 yuan. For large manufacturers in the southwest, the mainstream delivery price for 64% diammonium phosphate in North China is 2,400–2,450 yuan, while the mainstream delivery price for 57% diammonium phosphate is 2,150 yuan. Compared to early July, the prices offered by these manufacturers have all increased by around 50 yuan. It was precisely this 50-yuan increase that caused demand for diammonium phosphate in the North China market to come to a halt. Some dealers who had already received the product said that retailers at the grassroots level were not willing to pay the current high prices, and many were concerned about price drops in September. On the other hand, the pricing of compound fertilizers is relatively low this autumn; the current average factory price for 45% sulfur-based compound fertilizers is around 1950 yuan, with various promotional offers available when purchasing them. Undoubtedly, these compound fertilizers are more favored by the downstream market compared to diammonium phosphate after the price increase. Secondly, let’s analyze why the factories have raised their prices this time; in fact, some of the sales staff at these factories say that the prices of diammonium fertilizers will continue to rise in the future Firstly, exports during the off-season have always been the most effective measure taken by China’s diammonium phosphate manufacturers to balance excess domestic production capacity. Unlike in previous years when some export orders were below cost, currently, due to low prices of raw materials, some domestic diammonium phosphate manufacturers achieve higher profits from exports than from sales in the domestic market. Additionally, with the arrival of the autumn markets in South Asia and Southeast Asia, the export prospects remain favorable for the coming period. Secondly, factory inventories are currently low. According to the author’s investigations, due to strong export demand and the scheduled maintenance periods for some enterprises in June, most factories have low inventory levels; in some factories in Hubei, the inventory is only around a thousand tons. Third, there is a limited supply of goods available domestically in July and August. Most enterprises in Hubei placed many orders at prices ranging from 2100 to 2130 yuan before this price increase; some factories could meet all their orders, both domestic and foreign, until mid-August. Ammonium diammonium fertilizer manufacturers faced little sales pressure this summer, which naturally led to rising prices. Finally, will the price drop when I order it now in September? Firstly, there is still one and a half months left until September, so it’s a bit early to discuss this matter at the moment. However, the author has already analyzed in the preceding text the positive and negative factors in the current market. One thing that should be noted is that due to the low levels of raw material costs, diammonium fertilizer manufacturers can make profits both by exporting their products or by selling them in the domestic market. This reduces the risk of price cuts in the domestic market in September. In summary, the domestic market for diammonium phosphate has indeed entered a stalemate following the price adjustments, but this does not mean that prices will drop sharply. If exports of diammonium phosphate continue to perform well, it is possible that companies may raise their prices again by the end of July and early August. (Rong Guangwen)