Thread Content
Positive signals for exports – why isn’t the fertilizer market improving? Author/Source: China Fertilizer Network Date: 2020-09-07 Clicks: 5 At the beginning of September, the domestic autumn fertilizer market entered its second phase; wholesale markets across the country began to operate again, with most factories busy with shipments. There are also positive developments in the international market: first, 800,000 tons of urea were awarded contracts in India, and then it was reported that the offshore price of diammonium phosphate at some factories has reached 340 dollars per ton. Some of these factories already have export orders scheduled for October. However, the domestic market’s reaction to these positive developments has been disappointing; urea prices in some areas such as Shandong’s Lianghe region have even dropped. There are few new orders for diammonium fertilizer plants, and the downstream sector is reluctant to accept high prices. Currently, it is the off-season for urea sales, so a decline in prices is understandable; however, diammonium phosphate is in its peak sales period, yet the volume of new orders is already decreasing. Has a turning point arrived in the autumn market? First, the focus of the market has changed. To start, let me reassure everyone: although there are few new orders coming in for factories at the moment, this does not mean that demand for diammonium phosphate in China is weak; on the contrary, there is a certain degree of supply shortage in the domestic diammonium phosphate market. Due to the lower pricing in the early stage, most agents and traders placed orders by making payments at that time; the goods ready for shipment from some factories are not due until the end of September, and there is limited stock available from these factories, which is why fewer new orders have been placed. According to a survey by Zhongfei Net, the arrival volume of diammonium phosphate in the North China market is currently around 40-50%; for some dealers dealing in goods from Hubei, this figure is only about 30%. The focus of the market has shifted from factory sales to the shipping stage. Secondly, the preparation of fertilizer at the grassroots level has not yet been fully initiated. While wholesale markets are booming, the grassroots markets remain relatively underdeveloped. One reason is that some distributors are concerned that diammonium nitrogen will see price increases during the off-season and price drops during the peak season, so they tend to carry out such operations back-to-back ； Secondly, some local distributors believe that the current price of diammonium phosphate is already at a high level, with little room for further increases. Since the procurement cost at the beginning of October is not much different from now, they have decided to postpone purchasing diammonium phosphate and wait until the end of September or the beginning of October before making a decision. However, the need for fertilizers among farmers indeed exists, and as market conditions stabilize, this demand at the grassroots level will be unleashed in the near future. Finally, international demand is strong, while domestic supply is limited. The situation where downstream distributors worry about price increases in the off-season and price drops in the peak season arises because diammonium fertilizer plants exhaust the demand for the peak season during the off-season, and the goods produced during that time lack outlets, forcing them to flood the market at low prices. However, export conditions are favorable this year; the offshore price of diammonium phosphate in our country has risen to around 341 dollars. When converted to the price at which goods leave the factories in Hubei, it amounts to about 2230 yuan. Taking into account the costs of packaging and cash payment, this price is higher than the actual transaction price of 2220–2250 yuan in the domestic market. Therefore, some companies are relatively more enthusiastic about exporting. As the author has learned, certain factories delay the shipment of domestic orders in order to prioritize exports, which results in a shortage of goods for downstream distributors. To ease the pressure associated with domestic shipments, some factories have suspended accepting new export orders and are focusing on fulfilling existing domestic orders. In summary, against the backdrop of favorable export conditions, the main reason for the downward trend in urea prices is the lack of support from domestic demand. The difficulty in seeing price increases for diammonium phosphate is largely due to an abundance of supply ahead, rather than any change in market trends. With the support of both domestic and international markets, diammonium phosphate prices are expected to remain stable and show improvement in the autumn market. (Rong Guangwen)