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Both domestic and international markets are declining – where lies the future for diammonium phosphate? Author/Source: China Fertilizer Network Date: 2021-03-22 Clicks: 4. No situation lasts forever, and no flower blooms for a hundred days; this week, the export price of diammonium phosphate dropped to $560–570 per ton. Coincidentally, the domestic price of 64% diammonium phosphate at Bayuquan Port also began to fall, from 3200–3300 yuan to 3100–3200 yuan. Is the simultaneous price cut in both domestic and international markets merely a coincidence or is there another reason behind it? Let the author take you through an analysis of what has put diammonium phosphate in such an awkward situation. Let’s take a look at the reasons behind the price decline in the domestic diammonium phosphate market. As a product with strong seasonal patterns, it is inevitable for market prices to fluctuate toward the end of the sales season. However, this time the price cut for diammonium fertilizer seemed to occur a bit early; the demand for restocking in the local markets had not yet emerged, yet some distributors started reducing prices in order to get rid of their inventory. Is such behavior simply due to psychological factors? What drives downstream distributors to develop such a mindset? The phenomenon of inversion has been explained in detail by the author in several previous analysis articles, so there is no need to repeat it here. Let’s discuss the issue of timing instead. Based on past experience, when companies hold their prices high, it is usually not until April that some distributors start to reduce prices in order to clear their inventory. This year, however, this timing has advanced to early March. Moreover, according to the author’s understanding, the average level of inventory available in the domestic market is currently around 70%. It seems a bit early to try to clear inventory at this point; clearly, inventory pressure is not the main reason for the decline in diammonium prices. Rising corn prices have significantly increased the cost of land transfer, while the prices of seeds and fertilizers continue to climb. Among these three, fertilizers are often the last to be considered, which has caused most farmers to miss the opportunity to stock up on diammonium phosphate at lower prices. High prices have led to a deadlock in sales at the grassroots level, and the relatively low prices of alternative products such as compound fertilizers make diammonium phosphate uncompetitive. On one hand, there is diammonium phosphate, which offers low profits and high risks; on the other hand, there are compound fertilizers, which provide higher profits and greater stability. It is therefore easy to understand why some distributors choose to convert diammonium phosphate into cash and focus on promoting compound fertilizers, resulting in an inevitable decrease in the wholesale price of diammonium phosphate. After discussing the situation on the market sales side, let’s take a look at the factory supply. Due to maintenance work in some factories and adjustments to production plans, the overall operational rate of the diammonium industry is currently lower than it was before. Although international prices have declined, the profits generated from exports remain much higher for factories compared to domestic sales. Most diammonium phosphate manufacturers are keen to export, and the drop in prices does not mean a sharp reduction in export volumes. Some factories already have export orders scheduled until mid-April, with individual companies even having orders scheduled for shipments in May. It is understood that there is still substantial potential demand in India and Pakistan, and this decline in prices is merely a reflection of concerns in the international market regarding the increased export volume from our country. Overall, the supply in diammonium fertilizer plants remains tight, and there is no situation of dumping into the domestic market that would lead to price drops. In summary, the decline in prices both domestically and internationally has to some extent suppressed the information available to market participants. However, there have been no significant changes in downstream demand, the volume of goods arriving on the market is not particularly high, and international demand has not ceased either. There is no need for excessive concern; factory quotes will remain strong, with wholesale prices staying at relatively high levels. (Rong Guangwen)