CCM predicts China’s fertiliser price rebound in 2017 12-23-2016

According to the analysis of CCM, the price of fertilisers will hit the bottom soon and rebound to a higher grade in 2017 again. The main reason is a declining output of phosphate fertilisers and the end of the El Nino phenomenon.


The fertiliser market in China endured many negative impacts during 2016. These consist of falling prices of agricultural products, less demand, both oversea and domestic, a slow reducing of the high inventory, declining operating rates with the corresponding smaller profit margin, and a relatively low total value of the export business.


Source: Pixabay

 

The mood of the attendees at the China Phosphate Fertiliser & Compound Fertiliser Exhibition on November 4, 2016, in Nanjin City was correspondingly pessimistic. The main concerns for the producers of fertilisers are the missing orders for the traditional winter stockpiling and rising raw material prices with little chance of rising the fertiliser price as well. The exhibition itself was the largest one in its history, with more than 40,000 attendees and over 240 exhibitors.

 

The price of phosphate fertiliser is usually increasing in November, due to the winter stockpiling season and the resulting rising demand. However, this year distributors are still waiting for the stockpile orders to take action, because they are waiting for likely decreasing fertiliser prices or even don’t plan to stockpile at all. This led to a sales volume of fertilisers for winter stockpiling of only 20% to 30% compared to the same time in last year.

 

The winter stockpile usually is necessary to face the high demand of fertilisers in spring. Many distributors plan to do no stockpiling this year, because of the overcapacity of fertilisers in general, which may keep the price for fertilisers low, even in the heat time of spring. Mai Biyu, the general manager of Guangzhou Fenji Agricultural Means of Production, revealed to CCM, that the price of stockpiling fertiliser for winter may decrease and it will be hard for the fertiliser price to go up if the downstream demand isn’t strong the coming spring.

 

The new strategy of the distributor including a flexible buying of fertilisers on demand rather than keeping a high inventory has a massive impact on China’s fertiliser producers. It will put high pressure on the operating schedule and leads to an adaptation of any production plans made before.

 

The main raw materials for the phosphate fertiliser production are yellow phosphorus and sulphur. The prices of these upstream products are rising since October 2016. Normally, the price of fertilisers would increase according to this trend. This year, however, the huge oversupply of fertilisers makes it very difficult for manufacturers to raise the prices.

 

Increasing raw material costs, compared to low fertiliser prices will lead inevitable to lower profit margins of many producers. This effect has already led several small and medium-sized manufacturers to change their raw materials to cheaper, low-quality products. The price of overall phosphate fertilisers will be again affected by those low-end products, according to CCM.


 


What’s more, the high inventories of Chinese enterprises are the result of an overall decreasing export trend in 2016 The export volume of phosphate fertilisers and compound fertilisers was falling 28.9%, compared to last year. The total amount was only 3 million tonnes, according to China Customs.

 

Nevertheless, regarding all the negative trends for phosphate fertilisers in China, CCM’s analysts are predicting, that the bottom of the price fall is reached soon and the increase of price will follow promptly.

 

The first reason is a reduced output, that is likely to happen, looking at the huge inventories that are already existing and the pollution control in northern China, which orders several phosphate producers to lower their production in terms of stricter environmental policies.

 

Also, the El Nino weather phenomenon has ended, which will increase agricultural products demand in Africa and South America again.  El Nino occurs every three to seven years in different intensity. The recent El Nino was one of the strongest phenomena by now.


Due to typhoons in Southeast Asia and droughts in Africa, caused by El Nino, the end of this phenomenon will increase the agricultural production and output of affected countries again, which leads to a higher demand for phosphate fertilisers.

 

About CCM:

 

CCM is the leading market intelligence provider for China’s agriculture, chemicals, food & ingredients and life science markets.

 

Do you want to find out more about the phosphor market in China? Join our professional online platform today and get insights in Reports, Newsletter, and Market Data at one place. For more trade information on fertilisers visit our experts in trade analysis to get your answers today.

 

Tags: Fertilizer, Phosphorus chemicals

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