Chinese DAP market becomes more sluggish since May 05-24-2019

The Chinese DAP market has been experiencing a slack season since the beginning of May 2019. The sluggish situation is following the weak demand and the low export price. At the moment, the quotation of 64% of DAP from mainstream factories in the area of Hubei is RMB 2,600 – 2,650 per ton, while that in the South West reaches RMB 2,500 – 2,550 per ton. As for the export price, 64% of DAP in China has the value of USD 370 – 375. According to customs data, DAP’s total volume of export from January to March accounts for 1,108,600 tons but shows a lower export price.


Both operating rate and price of DAP to decline continuously in the near future

Generally, there is a decreasing tendency of both Chinese and overseas DAP markets. Under these circumstances, a reduction of operating rate and price of DAP is expected.

Market insiders predict that the operating rate of DAP would go down certainly. Because of the weak demand, enterprises will depend more on the export market in the later stage despite some obstruction of delivery. Besides, based on the recent maintenance period of Chinese DAP enterprises during the slack season, most of the DAP enterprises will have a certain overhaul plan until the end of June. As a result, a reduction by around 800,000 tons of DAP in the near future is predicted.

Additionally, the price of DAP would also undergo a drop. At present the price of cost for the raw materials of 64% of DAP is around RMB 2,500 with a decreasing tendency, including sulphur, phosphate rock and liquid ammonia, among which a continuous drop is seen in the price of sulphur. Due to the reduction of ammonium phosphate enterprises, the supply of phosphate rock is under a great pressure. Therefore, with the decrease of cost for the raw materials, the price of DAP is expected to decline in the later stage.


DAP to recover in the near future in light of the relation between supply and demand

Despite the slack season of the Chinese DAP market, according to the supply and demand between upstream and downstream enterprises, DAP does not seem to continue the sluggish trend in the future.

First of all, the fertilizer industry is in a good condition, in spite of the weak demand, the price of DAP is just expected to decrease slightly. A similar situation happened to urea last year. Compared with the price of RMB 1,600 - 1,700 at the same period last year, the quotation of urea from factories nearby the both rivers in Shandong remains over RMB 1,900 this year. Despite a lower market acceptance, the price of urea this year does not fall to the same price as last year. With such a good condition in the fertilizer industry, the price of DAP is not expected to descend dramatically.

Furthermore, the international DAP market seems quite promising. According to statistics from the customs, more export of DAP from China, up to 1,110,000 tons in the first quarter is witnessed this year, compared with that at the same period last year. Although the export price is lower, the demand of the Indian market is well shown with an advantage in the influence on the exchange rate. The recent devaluation of RMB boosts the export of enterprises. Despite a lower export price, with the help of the exchange rate, big difference cannot be made. 

For more information about China's fertilizer market, please have a look at our monthly newsletter Phosphorus Industry China Monthly Report.

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