Despite
a worldwide growing situation, China’s domestic phosphate fertiliser market
remains sluggish, as demand is low, mainly due to the slack season and
unfavorable policies. Hence, manufacturers are setting the sales focus on
international markets, where a growing competitive environment also is
threatening margins and success.
Source: Pixabay
According
to the Mosaic company, one of the biggest player in the fertiliser market,
the global demand for phosphate may grow at an average of 11% until 2022.
China’s
phosphate production is tight, leading to shrinking exports, a trend that is
likely to go on in the next years. However, as a result of shrinking domestic
demand, producers are focusing their sales on global markets, which keeps the
export volume higher in slack seasons. Chinese exporters use the season to
mostly fulfilling previous export orders, while the trade in international
markets remained low. The FOB price of
MAP
remained stable in April, while the one of DAP showed a small
increase.
The
reason behind the sluggish production are the stricter environmental protection
policies in China, which force companies to limit or suspend the production in
the heavy polluting industry and invest in expensive waste disposal treatment
systems. Also, smaller companies are getting wiped out from the market, not
able to keep running under the strict regulations.
The
implementation of stricter regulations and inspections are going on in 2017,
with China’s agrochemicals industry being one of the main targets this year.
Hence, continuing increasing production costs and rising prices of phosphate fertilisers are
the likely consequences of the government's new policy.
What’s
more, China’s change in the corn stockpiling policy has shown a significant
effect on the domestic phosphate fertiliser consumption. Corn is
traditional a crop with needs of a large amount of nutrients. The end
of the stockpiling policy in China has reduced the demand for corn, decreased
the price, and hence lessen the profit for farmers which leads to a dropping
output. Less fertiliser is needed which slumps down the market once again.
On
the other hand, the worldwide demand for phosphate fertiliser is
stable increasing in recent years. In the year 2016, the demand was able to
grow by 2.5% compared to 2015. That was a faster growth than in previous years,
where the annual growth rate was hovering between 1 and 1.5%.
While
the demand for phosphate fertiliser in India is increasing since
2013, China’s demand is shrinking since that year but is expected to increase
again in 2017 by about 1.5%. The demand in the rest of the world is increasing
slightly as well.
The
prices of both, diammonium phosphate (DAP) and mono ammonium phosphate (MAP)
have shown increasing trends in the world market recently. In China, the
opposite is the case.
The
price for MAP dropped down significantly in April 2017, by about 2.5% to 3.2%
month on month. As a result of the low MAP price, many manufacturers were
running on low production, only filling out 50% to 70% of the total production
capacity. In addition, domestic MAP producers suffered large inventories, since
most of the compound fertiliser companies have no ordered new
products.
The
price of DAP remained lax as well. While companies continue running on low
production, mostly fulfilling previous orders, the trading prices in some areas
decreased and unprofitable prices have led some companies to even stop quoting
prices for the domestic market. The domestic demand furthermore declined as the
result of national policies, namely replace chemical fertilisers with
organic, zero-growth of fertiliser usage, and formula fertilisation delivery.
China’s
phosphate exports are likely to continue falling in 2017, which would be the
second decreasing year in a row. According to analysers from
PotashCorp. Market intelligence firm CCM expects the domestic phosphate fertiliser market to
hover over the low level, with even further price drops likely to happen. The
focus will be continuously set on the export, where higher margins are
achievable.
China’s
phosphate fertiliser manufacturers are looking into hard times, where
domestic markets are unprofitable and international markets become more
competitive. The stricter environmental policies in China are pushing up
production costs, which will likely reduce the output and increase an
inevitable dilemma.
About CCM
CCM
is the leading market intelligence provider for China’s agriculture, chemicals,
food & ingredients and life science markets.
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