China’s phosphate fertiliser producer face trouble in domestic and overseas markets 05-03-2017

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.

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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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