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Positive developments in export markets: Could diammonium prices rise against the trend? Author/Source: China Fertilizer Network Date: 2020-06-01 Clicks: 6 There have been continuous positive developments in the international market recently. First, a factory in Hubei won a contract for 40,000 tons of fertilizer in Indonesia; later, Bangladesh issued a tender and Chinese companies won contracts for nearly 500,000 tons. The offshore price of diammonium phosphate in China rose to $304–308 per ton. With the continuous decline in the value of the yuan, these positive developments have tempted some industry insiders, with some manufacturers even claiming that prices of diammonium phosphate in China will rise soon. So, has the right time come to purchase diammonium phosphate? First, let’s take a look at the internationally market, which is seeing continuous positive developments. The 40,000-ton order won by Indonesia is equivalent to an offshore price of around $304 in China, a figure that is roughly the same as that of previous export orders. According to market rumors, in these tenders in Bangladesh, Chinese companies could win contracts worth up to 500,000 tons; after taking into account the fertilizer subsidies, the offshore price of diammonium phosphate in China could range from $307 to $311 per ton. However, the amount of fertilizer subsidies will be renegotiated next month, and it will then be difficult to achieve an FOB price of over $310. Therefore, the increase in the offshore price of diammonium phosphate in our country will not be significant. Moreover, since the shipping time for these orders from Bangladesh is as long as 3 months, the situation of supply exceeding demand in the domestic summer market has not improved markedly. Secondly, domestic summer demand is weak, and the supply of diammonium nitrate remains high. The summer season has always been the traditional off-season for the sales of diammonium phosphate in China. By the end of May, the sale of base fertilizers for summer corn in most areas of North China had come to an end, which further compounded the difficulties in shipping diammonium phosphate. Some manufacturers reported that the volume of shipments during this summer so far is only half of that in the same period in previous years. Most downstream distributors also said that there is no demand for fertilizers in the short term; even planning for fertilizer procurement in autumn will have to wait until the end of July or early August at the earliest. Therefore, in the short term, there are few large-scale transactions in the diammonium phosphate market in North China, with most manufacturers only making occasional sales. On the supply side, most diammonium phosphate production facilities in Hubei province have no plans for maintenance at the moment; a few factories will put new equipment into operation in June. Some enterprises in the southwest are undergoing scheduled maintenance, while the operational rate of diammonium phosphate plants in areas that are not major production hubs remains low. According to statistics from China Fertilizer Network, the operational rate of diammonium phosphate plants in China is 38.25%, slightly lower than previous levels. Nevertheless, compared to the demand in the summer market, there is still an oversupply. Finally, sulfur prices have risen, but overall production costs remain low. Recently, sulfur prices have been on the rise driven by electronic trading platforms; the price of granular sulfur at ports is 680 yuan, while the price at Sinopec’s Puguang Wanzhou Port is 660 yuan, and at the Dazhou plant it is 560 yuan. However, most downstream phosphate fertilizer manufacturers have not yet placed orders for sulfur. Additionally, due to the high overall utilization rates among these manufacturers, a slight increase in sulfur prices has little impact on the production costs of diammonium phosphate. For liquid ammonia, the prevailing acceptance price at factories in Hubei is between 2,340 and 2,400 yuan; negotiations may result in a price around 50 yuan lower. As for phosphate rock, prices remain relatively stable. According to statistics from China Fertilizer Network, in Hubei province, the total cost of high-quality diammonium phosphate amounts to around 1,980 yuan in 64% of cases. The domestic market price is still some distance away from the high-end cost levels, so there is little cost support. In summary, although the recent depreciation of the RMB has caused export prices to approach domestic transaction prices, demand in the domestic market remains weak. In the short term, the price of diammonium phosphate should remain stable, and downstream distributors should proceed with caution when making purchases. (Rong Guangwen)