Sodium Tripolyphosphate Market in 2008     

1. Market conditions in 2008   

China mainly uses two sodium tripolyphosphate (STPP) manufacturing techniques - the thermal phosphoric acid process and the wet phosphoric acid process. The most important influences in STPP's cost are the prices of phosphate rock, sulfur and yellow phosphorus.
    During the first half of 2008, influenced by the sleet and snow disaster early in the year, the yellow phosphorus enterprises in Yunnan, Guizhou and Sichuan provinces started production later than in previous years, making the yellow phosphorus supply insufficient. Then in May, the Chinese government raised the special export tariff on yellow phosphorus, phosphate rock and industrial phosphoric acid by 100%. This move, combined with the Sichuan earthquake of May 2008, was a heavy blow to the phosphate mining companies in the Jinhe and Qingping areas, and also the phosphate processing enterprises in the Mianyang region. Sichuan has a relatively complete range of phosphate varieties and a large production capacity for STPP, SHMP (sodium hexametaphosphate), and so on. However, the earthquake, to a certain degree, caused a shortage of these products. Furthermore, as a result of high oil prices, all nations expected a large increase in bio-fuel and food demands, and also worried very much about the shortage of phosphate resources. This, in turn, led to a huge jump in the demands for phosphate fertilizer and sulfur, bringing the price of these two products up quickly and even to a record high. At that juncture, the state's policy of levying an additional 100% special tariff on phosphate fertilizer caused significant drop in the supply of phosphate rock, phosphate fertilizer and yellow phosphorus in the international market, thus promoting a rapid rise of phosphate prices around the world. In this context, the STPP price rose fast from over RMB5 000/t to over RMB10 000/t during January 2008 and stayed high until October 2008. Intimidated by the continuing price growth of STPP, many downstream detergent enterprises began to use substitutes like zeolite 4A and reduced their use of STPP.
    The economic crisis after September 2008 brought the price of sulfur down quickly worldwide, giving wet phosphoric acid competitive advantages once again. The domestic yellow phosphorus price fell from the peak RMB30 000/t to RMB11 000/t in the end of the year. This also led to a rapid decline in the export price of STPP. In December, the FOB price of STPP fell below US$650 per ton.  

2. The development trend in 2009   

    (1) STPP faces relatively large export pressure and industry consolidation now. China suffers greatly from severe STPP overcapacity and relies mainly on export to ease its sales pressure. In 2007, China exported 353 000 tons of STPP and imported only 48 100 tons. In 2008, it exported 562 000 tons and only imported 3 060 tons. Therefore, China's STPP industry is strongly influenced by the international price. With the ongoing international financial crisis, the global demand for STPP will surely shrink. Given the fast downward trend of prices internationally, it is estimated that the STPP market will remain in the doldrums in 2009 and some small-scale companies without resources will not be able to carry on.
    (2) From the environmental point of view, with the rapid economic development, nations around the world care more about environmental protection. The water shortage, in particular, makes people more concerned about water pollution and cry out more urgently for phosphorus restriction, so the demand for phosphorus-containing detergents has been reducing and STPP market competition becomes more intense. Many areas in China are making great efforts to prohibit the use of phosphorus, too. The above-mentioned factors, added to the continuing development and popularization of substitutes like zeolite 4A, result in a sharp decline in global consumption of phosphorus-containing detergents.
    (3) During 2009, the sulfur market will continue to see oversupply and the sulfur price will stay low, leading to reduced phosphate production cost and STPP export prices.
    In short, the oversupply situation of phosphorus chemical products in 2009 will become even more severe, and market competition will become fiercer.

3. Suggestions on export   

    (1) It is suggested that the Chinese government should implement an export tax rebate for STPP export. At present, China's STPP market relies mainly on export, and an export tax rebate policy for STPP would make domestic companies more competitive in the international market. Therefore, the government should, on one hand, implement an export tax rebate policy for STPP, and on the other hand, continue speeding up the closure of some small yellow phosphorus electric furnaces and limiting the approval for building new ones so as to control the STPP capacity strictly and shore up its price.
    (2) More international trade barriers are immerging. Remarkably, the EU REACH certification system has, on one hand, limited the export by Chinese enterprises, and on the other hand, increased the enterprises' export costs with its high certification fee, legal expenses and human costs. Therefore, we hope that relevant state departments can intensify policy guidance and financial support for export enterprises.
    (3) STPP can be divided into food grade STPP and industrial grade STTP in specification. Although industrial grade STPP faces some uncertain factors now, food grade STPP is no doubt a key deep-processed phosphorus chemical product supported by the State and with high technology content. We hope that the government will list STPP with different specifications as differently taxed items and give higher export tax rebate for food grade STPP so as to raise the threshold for manufacturing food grade STPP and promote the sustained and healthy development of the STPP industry.