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Can diammonium sulfate continue to thrive in 2021? Author/Source: China Fertilizer Network Date: 2020-12-21 Clicks: 15 As late December approaches and 2021 draws nearer, looking back at this past year, we have experienced a lot and gained much as well. At the beginning of the year, the pandemic broke out, and the people of the whole country united to fight against it, showing the world China’s strength. Ammonium dihydrogen phosphate manufacturers were not defeated by the pandemic; at the call to ensure preparations for spring plowing, they actively resumed production, and through coordinated efforts across the supply chain, spring plowing could proceed normally, thus ensuring food security. As the region that recovered fastest from the pandemic, this gave domestic diammonium phosphate manufacturers an advantage in international competition, and it also laid the foundation for the price increases that have occurred over the past year. The domestic winter storage market is currently at an impasse, and demand in international markets is slowing down; can diammonium phosphate maintain its strong performance in 2021? Firstly, the supply pressure is low. Affected by the pandemic, most diammonium phosphate manufacturers in Hubei were shut down in February, and the transportation of fertilizers also came to a standstill for a time. To meet the fertilizer needs at the grassroots level, production plants are operating at full capacity, and the inventory that companies had accumulated in advance is also being used up. The pressure on diammonium fertilizer manufacturers on the supply side decreased instantly; this is why, after a brief period of decline following the end of spring, diammonium fertilizer saw a rapid rise driven by summer demand, and this upward trend continued into the winter storage market. Companies will be able to maintain their dominant position in the upcoming spring market, thanks to this reduced supply pressure. Secondly, through corporate integration, competitive advantages become evident. The diammonium phosphate industry is inherently a sector that requires high entry barriers, involving heavy resources and substantial capital investment. With the integration of KaiPhos Group and Wengfu Group this year and the establishment of a new sales system, this industry has shifted from the traditional model dominated by four major players to a model similar to that described in the Romance of the Three Kingdoms; pricing power has become more concentrated, and the position of companies in this industry within market competition has significantly improved. This year’s winter storage market is a perfect illustration of this: while the prices of compound fertilizers remained stuck at low levels, diammonium phosphate manufacturers continued to raise their prices. Even a slowdown in demand from end-users failed to cause any fluctuations in these prices, highlighting their dominant position in the market. Once again, favorable conditions for exports may continue. Overcapacity in the production of diammonium phosphate is not a new issue in China. This year, some factories have started up new production facilities, yet the price of diammonium phosphate in the country has continued to rise. The main reason for this is that exports have helped to absorb the excess production capacity in the country. The pandemic has led to tightened global food trade, resulting in a decline in the production capacity of diammonium phosphate in some regions and rising international prices. Although major buyers such as India and Pakistan have temporarily suspended their imports of diammonium phosphate, the low inventory levels in these countries compared to the same period in previous years represent potential market demand. The suspension of imports at present is simply due to budget constraints as the fiscal year comes to an end and to the limited availability of goods on the market. Once subsequent demand is unleashed, it will provide some support for the domestic spring market. Finally, compound fertilizers have a lower price. With all these positive aspects mentioned, does that mean diammonium has no operational risks at all? That’s not the case; the same factor that led to success can also lead to failure, and the continuous rise in the price of diammonium fertilizers has also created potential problems for them. Downstream distributors have slowed down their purchasing pace, not only due to high prices but also because of the large price difference between diammonium phosphate and compound fertilizers. This year, the winter storage campaign for diammonium phosphate did not see any price reductions; the price of 64% diammonium phosphate in Heilongjiang started at 2600 yuan per ton as soon as it arrived at the ports. So, what is the price of compound fertilizers at this time? Is the ex-factory price of the 45% sulfur-based general-purpose compound fertilizer 1,800 yuan or 1,900 yuan? The maximum price difference between diammonium phosphate and compound fertilizers once approached 700 yuan; most downstream distributors preferred to purchase the relatively cheaper diammonium phosphate. Although the price of compound fertilizers has risen recently, the price of diammonium phosphate has also increased, meaning that compound fertilizers still hold an advantage. In summary, 2020 was a remarkable year for diammonium compounds. However, the market always belongs to the future, and next spring will be a crucial moment in determining whether diammonium compounds can maintain this success. It is hoped that the market conditions will remain favorable throughout next year as well. (Rong Guangwen)