Thread Content
Weak domestic demand and export concerns: How long can diammonium phosphate hold on? Author/Source: China Fertilizer Network Date: 2021-05-10 Clicks: 14 With the end of the May Day holiday, the spring fertilizer market has largely come to an end. Domestic prices for diammonium phosphate produced by factories remain high; in Hubei province, the standard ex-factory price for 64% diammonium phosphate is 3,000–3,100 yuan per ton. For large manufacturers in the southwest, the delivery price of 64% diammonium phosphate to North China is 3,200–3,290 yuan per ton. However, downstream distributors are unwilling to purchase this expensive diammonium phosphate, as domestic demand is relatively weak. The strong performance in international markets has been the most important factor supporting diammonium phosphate manufacturers in maintaining high prices. To date, the offshore price of diammonium phosphate in China remains stable at 533–535 US dollars, which is much higher than the domestic prices; some manufacturers have scheduled their export orders until the end of May. However, with the widespread outbreak of the pandemic in India, future demand is uncertain. Coupled with an increase in international supplies of diammonium phosphate, China’s exports of this compound are facing challenges; how long can diammonium phosphate manufacturers maintain their current pricing? First, looking at domestic supply and demand. At present, the operating rate of diammonium phosphate manufacturers is relatively high; only a few small plants in the southwest have temporarily ceased production due to raw material costs. Most large manufacturers do not have any plans for maintenance at the moment. According to statistics from China Fertilizer Network, the overall operating rate of diammonium phosphate manufacturers in China is around 45%, with an average monthly production volume of over 1.1 million tons. This indicates that China has a decent capacity to supply diammonium phosphate. After the spring market closes, fertilizer for summer corn becomes the main demand in the market, while the use of diammonium phosphate decreases. The next time it will be used on a large scale is during the autumn wheat fertilizer market. Dealers do not start preparing fertilizers until June or July at the earliest, which suggests that the situation of oversupply in the domestic market is not likely to change significantly in the short term. Secondly, export quotes are high**, but concerns are already emerging. As mentioned earlier, the export price of diammonium phosphate in our country is much higher than its domestic price; some factories have scheduled their export orders until the end of May. It seems then that the export situation for diammonium phosphate is not favorable at all Where does the talk of hidden concerns come from? Although Bangladesh has postponed its tender to the end of May and there is still a demand of over 700,000 tons, India – another major buyer in the international market – is facing problems. Leaving aside whether the widespread outbreak of the pandemic in India will affect future demand for diammonium phosphate and its transportation, the fact that India has decided to keep its fertilizer subsidy policies unchanged means that fertilizer importers will suffer losses, which will greatly reduce their willingness to purchase diammonium phosphate and thus increase the uncertainty surrounding future demand. Finally, high raw material prices have led to increased production costs for diammonium fertilizers. Sulfur prices have remained high due to the significant increase in the prices of downstream phosphatic ammonium products, and there is no possibility of a decline in the short term. Phosphorus ore prices have also been rising, as the phosphatic fertilizer market is viewed positively; the demand for phosphorus ore from downstream phosphorus chemical industries has increased, which is why phosphorus ore prices in Hubei province rose by 50 yuan in May. The price of synthetic ammonia has dropped from its peak levels; currently, the prevailing ex-plant price in Hubei is around 3,200 yuan. According to Chinese fertilizer statistics, 64% of the high-end diammonium phosphate products in Hubei province currently cost around 2,850 yuan per unit. This leaves a considerable profit margin compared to the domestic and international prices offered by diammonium phosphate manufacturers in that region. At the same time, it means that there is still a risk of price declines if there are issues in market demand. In summary, domestic market demand is weak, and the Indian market presents risks. The operation of diammonium phosphate manufacturers remains relatively stable, coupled with considerable profit margins; as a result, diammonium phosphate prices are expected to remain high in the short term. There is a significant risk associated with stockpiling, and it will be necessary to pay attention to the maintenance activities of these manufacturers as well as trends in the international market. (Rong Guangwen)