As fertilizer producers begin to sell their winter supplies of
stored fertilizers, and as global demand for diammonium phosphate (DAP) remains
strong, the DAP market is predicted to maintain an upward trend throughout the
near future.
Currently, the quoted arrival price of a 64% DAP solution in
Heilongjiang and Urumqi is around RMB 2,750/ton, while the ex-factory price of a
64% DAP solution from manufacturers in Hubei province ranges from RMB 2,350/ton
to RMB 2,400/ton, which is the highest price that has been reached this year.
The DAP market is stable and shows a strong upward trend, mainly for
the following reasons. First, DAP produced in China is mainly exported to India,
and DAP production in India is decreasing. According to some national news
reports, the long rainy season in India is increasing the strong demand of DAP.
During the first three weeks of October, the sales volume of DAP in India reached
1.05 million tons, which passed the sales volume of 1.04 million tons achieved in
October of the previous year. The FOB price of DAP in China is around USD
360/ton. According to statistical data released by Chinese customs, over 550
thousand tons of DAP have been exported every month during the second half of
2020. In particular, the DAP export volume reached 802 thousand tons in August,
which was an increase of 61.2% year over year.
Limited supply of DAP stored
for winter season in China, leading to seller’s market
Second, the surge in the price of corn
this year has led to an increase in DAP price. The price of corn after autumn
has reached RMB 2,400/ton, which is the highest price in the past four years.
Third, due to the low supply of DAP in the northeastern and the northwestern
regions of China, as well as DAP enterprises’ main focus on exports, storage of
DAP for winter market has been limited. If China’s DAP exports continue to increase,
there will be a short supply of DAP in the winter, which will cause continuous
increases in the price of DAP.
DAP production slows and
material costs rise, making short-term price correction unlikely
Fourth, China’s DAP production is
decreasing. For instance, Guizhou is one of the main DAP production locations
in China. Recently, the production rate of DAP in many phosphorus industries in
Guizhou has been decreasing. Data shows that the daily output of DAP from
phosphorus industries in Guizhou is around 9,000 tons, and the DAP production
in China in October was 1.21 million tons, a reduction of 70 thousand tons
compared to September. Fifth, the cost of raw materials for DAP production is
increasing, which indirectly raises the price of DAP.
Three main materials for
DAP production are namely sulfur, phosphate rock, and liquid ammonia. The price
of sulfur is currently increasing sharply. The recent price of liquid ammonia
has reached RMB 2,900 on average, which is an increase of 7.2% compared to
October. The price of phosphate rock remains steady. With this limited DAP
production, and with the increased cost of DAP production, it is unlikely that
the DAP supply in China will increase significantly during the near future.
For more information on China’s
fertilizer market, please check our Phosphorus
Industry China Monthly Report.