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Fertilizer market sees overall price increases – Is now the right time to purchase DAP? Author/Source: China Fertilizer Network Date: 2020-10-26 Clicks: 17 In the golden autumn of October, scenes of harvest can be seen throughout the country. Rising grain prices bring joy to farmers, and the winter storage market for fertilizers also booms taking advantage of this favorable situation. With support from futures markets, urea prices continue to rise; in the Linyi region, the purchasing price has climbed to 1,750–1,760 yuan per ton (the same unit applies hereafter) ； The quote for monoammonium phosphate has also been rising, as downstream compound fertilizer manufacturers begin to stock up on winter raw materials. According to a survey by China Fertilizer Network, at the Dalian Bayuquan Port, the ex-works price for some 55% powdered products has reached over 2,000 yuan ； Raw material prices are on the rise; some compound fertilizer manufacturers have slightly increased their quotes. The price of 45% sulfur-based compound fertilizer at delivery points in Heilongjiang is 2,150 yuan. The winter stockpiling market is performing exceptionally well across the board. So, has the right time to purchase DAP for winter stockpiling arrived? Inventories are at low levels; production has been scaled back. Currently, the winter storage market is in its initial phase. Quotations for compound fertilizers are being tested at various levels, from low to high. In contrast to previous years, when prices first declined and then rose, DAP prices have started at a high level this year. Although downstream distributors have given rather muted responses, the main reason for manufacturers’ confidence in maintaining these high prices is the low level of inventory. Affected by the pandemic, uncertainties in international grain trade have increased. To ensure food supply security, countries around the world are placing great emphasis on grain production. The export market for DAP is performing well; according to a survey by China Fertilizer Network, most DAP manufacturers have stock levels of less than 10,000 tons. Against this backdrop, the problem of goods flowing back from ports—which used to be a cause for concern—has virtually disappeared. In October, major manufacturers in the Southwest region significantly cut their production due to insufficient raw material supply. The overall operating rate in the region stood at just 37.23%, a decrease of 10 percentage points compared to the previous period. Additionally, purchases made by major traders such as Beidahuang further bolstered the confidence of DAP producers in maintaining high prices. Competitor prices are rising slowly; favorable export conditions are boosting the domestic market. Although the postponement of the phosphorus compound fertilizer conference led to a deadlock in the winter stockpiling of compound fertilizers, recent fluctuations in raw material prices have prompted compound fertilizer manufacturers to raise their prices slightly, which undoubtedly narrows the price gap between diammonium phosphate and compound fertilizers. I believe everyone has a certain understanding of the factors that could benefit the international market in the third quarter. What is truly of concern is the international diammonium phosphate market during the period from the fourth quarter to next spring. India has lifted the restrictions on subsidies for fertilizer imports, which is the main reason why the country was able to import 2 million tons of urea in recent times. Does this mean that diammonium fertilizers can also maintain their strong position in the international market thanks to this policy, and continue to support the domestic market? Even if the above reasoning doesn’t hold true, historical data shows that China’s total exports from November to March of the following year range between 1.3 million and 1.5 million tons. In years when factories had ample inventory and faced significant supply pressures, such a volume would have been negligible. However, given that most manufacturers currently have virtually no inventory at all, this figure serves as a much-needed positive factor for support. Raw material costs have risen slightly. Affected by the reduced mining activities in winter, phosphate rock prices have risen by 10–30 yuan recently. Although the increase is not significant, phosphate rock accounts for a large proportion of the production costs of diammonium phosphate. The price of sulfur also followed the usual trend of rising in mid-October; the price of granular sulfur at the Yangtze River port climbed to 755 yuan. According to calculations by China Fertilizer Network, the production cost of DAP has risen by approximately 100 yuan recently; this will provide certain support to the winter storage market. In summary, the winter stockpiling market has kicked off, and fertilizer prices have risen across the board. The price of DAP remains at a high level, with little chance of a price drop in the short term. To avoid potential supply shortages, downstream distributors should make small-scale stockpiles. (Rong Guangwen)