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Ammonium prices soaring – is rationality still needed? _Author/Source: China Fertilizer Network Date: 2020-11-05 Clicks: 5 Recent prices for monoammonium phosphate have risen sharply; it is reported that the ex-factory price for 55% powdered monoammonium phosphate in Hubei has reached 2,050 yuan per ton. Last week it was around 1,950 yuan. At this rate, the price could rise by at least 50 yuan by next Monday The author believes this is possible; however, for now it applies only to the quotes for monoammonium. The actual transaction prices of monoammonium are not increasing that rapidly, and recently only a few small orders have been sold at high prices. Is it really the case that the market for monoammonium is poor? Is the price of monoammonium artificially inflated? Why are there not many high-priced transactions for monoammonium at the moment? What should downstream users do in the face of the soaring prices of monoammonium? Regarding the above issues, it is still necessary to return to the three key factors affecting the price of monoammonium: supply, demand, and upstream raw materials. The author provides the following analysis on these three points. First, on the supply side. Since the end of the pandemic this year, the inventory levels of ammonium phosphate producers have been low, with some companies having no inventory at all. This has laid the foundation for recent price increases in ammonium phosphate. At present, most ammonium phosphate producers have little inventory and have many orders to fulfill, which can be met until December; in some cases, delivery can be carried out until the end of December. It is reported that compound fertilizer manufacturers outside Hubei’s large-scale producers are lining up to purchase ammonium phosphate in advance. Even ammonium phosphate producers in Yunnan, who do not have a logistical advantage, have seen their prices rise continuously over the past two weeks, with the increase already reaching 100 yuan. The enterprises that were scheduled for maintenance in October have not taken any action yet after National Day; most of them are focusing on production. In the middle and late part of the month, several ammonium nitrate-producing companies will begin their maintenance work. The large factory in Hubei will be under maintenance until around November 15, while the smaller factories in Sichuan will continue maintenance until late December. Several large factories will carry out rotational maintenance on certain of their facilities for a few days each. Although the overall production rate remains largely unchanged, it has slightly declined, which more or less provides positive support for rising prices of ammonium nitrate. Second, on the demand side. Before the National Day holiday, some large manufacturers of compound fertilizers began to purchase ammonium phosphate in advance. After the National Day, with the announcement that the phosphorus-based compound fertilizer conference would be postponed, ammonium phosphate production accelerated significantly. Other compound fertilizer manufacturers and traders also showed a strong interest in purchasing ammonium phosphate; several large producers received orders amounting to tens of thousands or even over a hundred thousand tons each. They have started to limit the number of orders they accept. The downstream industry believes that an increase in the price of ammonium phosphate is inevitable. Even though their existing stock of ammonium phosphate is sufficient for production until around December, they are still seeking additional orders in case they run out of this material later on. Furthermore, the rising price of ammonium sulfate raw materials has increased the cost of ammonium sulfate. Ammonium sulfate producers are under pressure and have stopped taking on new orders or limited them; compound fertilizer manufacturers find it difficult to obtain spot supplies, but they have gradually accepted the rising prices of ammonium sulfate and are more willing to make purchases. By early November, spot ammonium sulfate was in short supply in the market; many factories stopped accepting orders. Fertilizer manufacturers queued up at ammonium sulfate producers to purchase it in advance, while traders had little stock available, and even if they did have some, the quantities were small, so they mainly stopped selling it. Third, regarding raw materials. After the National Day holiday, the price of phosphate rock increased by around 10–30 yuan. Although downstream users of ammonium phosphate were not quick to adopt this higher price, it still increased. Moreover, phosphate rock accounts for a significant proportion of the cost of ammonium phosphate; an increase of 10 yuan in the price of phosphate rock results in an increase of 17 yuan in the price of 55% ammonium phosphate. Sulfur continued to rise throughout October; the price of sulfur at Puguang Wanzhou Port increased by 90 yuan in that month. For every 100 yuan increase in the price of sulfur, the cost of 55% powdered ammonium sulfate rises by approximately 44 yuan. Although the raw materials used by enterprises in recent times are mostly those whose prices had not risen earlier, and some enterprises possess their own phosphate mines, the improving trend in raw material prices provides a certain basis for an increase in the price of monoammonium phosphate. In summary, at present, it is clearly a seller’s market for monoammonium phosphate. The downstream buyers are willing to accept higher prices in order to obtain the product as soon as possible. Although there have been no large orders at high prices yet, it is expected that the prices of monoammonium phosphate will continue to rise in the short term, with further increases in sales volume as well. (Zhao Hongye)