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With the policy of rising prices for fertilizers, will domestic diammonium phosphate be given priority in price cuts? Author/Source: China Fertilizer Network Date: 2021-07-05 Clicks: 25 Since the start of the summer market, fertilizer prices have risen sharply; the price of urea has increased significantly due to multiple price adjustments, with the ex-factory price of urea in Shandong reaching nearly 2,800 yuan per ton (the same unit is used throughout) ； Although it hasn’t set any historical records in terms of potassium fertilizers, it is by far the most dynamic among all types of fertilizers; the price of potassium chloride at ports saw a monthly increase of over 1,000% in June ； Even the previously most affordable compound fertilizers have seen significant price increases; some manufacturers are charging over 2,600 yuan for their 45% chlorinated general-purpose compound fertilizers, while certain manufacturers are charging as much as 3,000 yuan for their 45% sulfur-based general-purpose compound fertilizers. Diammonium phosphate was naturally not willing to fall behind; supported by high export prices, the domestic pricing for diammonium phosphate products remained high. Taking the Hubei region as an example, the ex-factory price of 64% diammonium phosphate stayed between 3,300 and 3,400 yuan. However, the increase in the price of fertilizers in this market is truly significant. The relevant authorities have taken notice of this phenomenon. Rumors that tariffs on urea exports will be raised are still circulating, and according to foreign media reports, these authorities have asked diammonium fertilizer producers to reduce their export volumes after August in order to ensure an adequate supply for the domestic market during the autumn season. Will domestic prices drop in response? First, is the rumor true? Relevant departments have indeed sent working groups to Henan and Hebei recently to investigate the market situation, but some people might say that it is an investigation regarding urea – so what does that have to do with diammonium? Moreover, no official documents have been released regarding the policies for regulating urea, and the policies concerning diammonium fertilizers are currently nothing but unfounded rumors. At present, the price of diammonium phosphate is indeed at a very high level. If these companies continue to export it, domestic prices are likely to keep rising, putting further pressure on rural farmers to purchase fertilizer. As an important material related to people’s livelihood, chemical fertilizers are under constant monitoring. Diammonium phosphate is one of the main types of fertilizers available in the autumn market, and it is usually produced by large state-owned enterprises, which facilitates intervention by the relevant authorities. After all, the purpose of state-owned enterprises is not merely to make profits; social responsibility is even more important. Secondly, raw material prices remain high, keeping production costs elevated. Affected by international inflation, commodity prices have remained high. Although the inventory of sulfur at our country’s ports has remained around 2 million tons, the price of granular sulfur at these ports remains high, at around 1,600 yuan per ton. Due to the sharp rise in urea prices, the operating rate of ammonia synthesis plants has continued to decline; coupled with restrictions on raw materials and transportation in some areas, the price of ammonia has also increased significantly. In Hubei province, the standard ex-plant price for ammonia synthesis products has risen to 4,000 yuan. As for phosphate rock, rising prices are driven by increasingly strict environmental protection measures; currently, the price of 28% phosphate rock in the Yichang area has reached 520 yuan per ton. Rising raw material prices have increased production costs for enterprises, thereby reducing the room for negotiation in the pricing of diammonium compounds. Finally, whether there is an imbalance between supply and demand in autumn. This issue is the core problem of the entire autumn diammonium market; we will discuss it last. China’s apparent annual consumption of diammonium phosphate is around 8 million tons, slightly higher in spring and slightly lower in autumn. Taking into account the higher prices of diammonium phosphate this year and the resulting decline in market consumption, an apparent consumption of around 3 million tons can still be achieved. On the supply side, China’s average monthly physical production of diammonium phosphate is currently around 1.2 million tons, and this figure does not include some facilities that have been shut down for long periods; thus, the production capacity for diammonium phosphate has not been fully utilized. The so-called plan to build up inventory of 2 million tons, as reported by foreign media, poses no significant problem given the excess production capacity of diammonium phosphate manufacturers in our country. With the attention paid by relevant authorities, these manufacturers will focus on the domestic market during August and September; coupled with the existing social inventory from previous periods, there is little likelihood of a supply-demand imbalance in autumn. In the worst case, there might only be a slight shortage. In summary, the general rise in prices in the fertilizer market has drawn the attention of relevant authorities, and restrictions are likely to be implemented to ensure a secure supply of fertilizers for the autumn season. It should also be noted that the cost of diammonium phosphate has risen significantly at present, and the autumn fertilization season in China is still some time away; therefore, the impact of regulatory measures on the price of diammonium phosphate may not be as significant as expected. (Rong Guangwen)