In May 2016, China’s diammonium phosphate (DAP) market entered the off-season
after the spring ploughing period.
Source: Baidu
In the domestic market, trading was slack and the DAP price began to fall
slightly. To be more specific:
- In Yunnan Province: operating rate declined; most enterprises maintained their
suspension of production; a few enterprises have received new export orders at
low prices.
- In Hubei Province: operating rate was quite stable; trading was lax; the
average ex-works price of 64% DAP was about USD402.69 million (RMB2,600/t).
- In Shandong Province: trading was lax and enterprises suffered heavy pressure
from inventory; quotations for ex-works price of 57% DAP were around USD356.23
million (RMB2,300/t).
Usually, Chinese phosphate fertilizer enterprises can run down their inventory
thanks to the increasing sale of compound fertilizers in summer. However, this
year, influenced by the adjustment to the crop planting structure by the
Ministry of Agriculture of the P.R.C., sales of traditional compound
fertilizers are down. As a result, most phosphate fertilizer manufacturers lack
faith in the market and have reduced their operating rates.
Xu Dingguo, sales manager of Yunnan Yuntianhua Co., Ltd., disclosed: “Our DAP
operating rate is below 70% currently, down significantly compared with about
80% in previous years.”
In regard to the overseas markets, Chinese phosphate fertilizer enterprises
have been suffering YoY falls in both volume and price in the first half of
2016.
“Judging from the export market in the first half of the year, the total demand
for DAP in the whole of 2016 from overseas markets may reduce by 40% YoY,”
Sales manager Xu said. “That’s mainly because market demand will be influenced
by droughts in Southern Asia and fluctuation of exchange rates may also impair
initiative in imports in Southern Asia and South America. Today, at an export
price of USD300-340/t, Chinese enterprises reap very limited profits.
Nevertheless, DAP price still keeps falling in the international market.”
Between Jan. and March 2016, China exported 593,784 tonnes of DAP, decreasing
by 36.55% YoY and the average export price was USD404.48/t, down by 11.94% YoY,
according to data from the General Administration of Customs of the P.R.C.
According to CCM’s research, many Chinese DAP enterprises have attempted to
battle against the depressed market conditions in the following ways:
1. By controlling operating rates so as to avoid excess inventory;
2. By expediting adjustment to product structure and develop innovative service
mode;
3. By further exploring potential markets in China and building new sales
channels as well as expanding targeted markets in foreign countries.
As market demand from domestic and overseas markets is unlikely to recover in
the short run, CCM believes that the above measures will not have an immediate
effect. With the market price of DAP remaining low, 2016 may be an unprecedentedly
difficult year for Chinese DAP enterprises.
This article comes from Phosphorus Industry China Monthly Report 1605, CCM
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Tag: fertilizer DAP phosphate