By Xiao Li, Sublime China Information
China’s phosphate fertilizer production enterprises, mostly located in Yunnan, Guizhou, Sichuan and Hubei provinces with abundant phosphate, are in line with resources distribution. In 2022, the output of domestic phosphate fertilizer occupied around 36% globally.
In 2022 China’s phosphate fertilizer market saw ups and downs. Mismatches in supply and demand, market polarization and a change in traditional fertilizer preparation all had impact on the market. Though overcapacity decreased after industrial restructure, oversupply still existed.
Price review of phosphate fertilizer in 2022
In 2022 phosphate price resembled an inverse “V”, with significant rises and falls. That year, as of late December, average market price of mono ammonium phosphate (MAP) was RMB3 477/ton, 18.29% higher than the previous year. The top price was RMB4 598/ton in June, with the lowest value being RMB2 878/ton in September. Also the same year, diammonium phosphate (DAP) market price was RMB4 037/ton, 19.33% higher than 2021, with a peak of RMB4 680/ton in June and a low of RMB3 704/ton in October.
Rising raw material costs drove the price increase in the first half of 2022. The main material’s prices of sulphur, sulfuric acid, rock phosphate and synthetic ammonia increased, driving up production cost, with the price of phosphate fertilizer rising faster. But in the second half of the year, the price reduction was brought on by raw material prices plummeting upon reaching the peak, making people gloomy about the market. And regular customers buying the commodity expanded domestic supply, but some traders rushed to see the returns, causing the price to fall significantly.
Domestic phosphate supply-demand
China’s phosphate fertilizer industry is typically resource-intensive, with Hubei, Yunnan, Guizhou and Sichuan provinces having a distinct phosphate advantage and high output concentration. As for capacity distribution, Hubei Province has the highest MAP capacity, accounting for 51% of the total, followed by Sichuan province with 11%, both Guizhou and Yunnan province accounting for 8% respectively. Shandong and Hebei provinces have a small amount of capacity. And Guizhou province holds the largest amount of DAP, reaching 31% totally after 2 Groups’ capacity optimization in the province, followed by Yunnan and Hubei provinces with 28% and 27% respectively. And other provinces have a scattering of remaining capacity.
New capacity in overcapacity industries is subject to strict national regulations, making enterprises with resources in the provinces of Yunnan, Guizhou, Sichuan, and Hubei more competitive. In 2022, MAP CR10 capacity proportion reached 58%, basically equal to 2021, 10% higher than in 2018. In the same year, the capacity proportion of DAP CR10 was around 79%, one percent down from 2021. There wasn't much new capacity added in 2022, and the capacity cardinality increased, but CR10 enterprises had high capacity concentration.
Judging from the supply, the capacity of MAP in 2022 was 19 450 000 t/a, 0.52% higher than the last year. The output was 9 380 000 tons, reducing 11.76% from 2021, and the supply was about 11 010 000 tons, down 10.49% year-on-year. And the capacity of DAP was 21 120 000 t/a, with a year-on-year rise of 1.44%, and the output was 12 690 000 tons, falling 13.67% year-on-year. And total market supply was around 15 450 000 tons, with a year-on-year reduction of 3.86%.
Regarding demand, domestic phosphate saw a steady reduction. In 2022, total demand of MAP was around 9 000 000 tons, down 15.65% from the previous year, while that of DAP was 11 700 000 tons, decreasing 12.10% from one year ago.
Changes in supply and demand in 2022 lied in: China's phosphate fertilizer demand has decreased significantly because of progressive cancellation of preferential policies for chemical fertilizer companies since 2015 and the development of an Action Plan for Zero Growth in Fertilizer Usage by 2020. Besides, in 2022, the exports of phosphate fertilizer fell after export legal inspection replaced commodity inspection. Despite high international prices, the time taken by export commodity legal inspection is longer, with weak correlation between domestic and worldwide pricing, which led to an increase in domestic supply and a decline in some enterprises output. Additionally, in the first half of the year, market demand remained increasing, and downstream consumption grew after the price decreasing of raw material in the second of the year. However, the increase in domestic demand was lower than the normal exports in previous years, so the oversupply still existed. Moreover, the phosphate fertilizer was delivered late in Northeast market due to the transportation restriction in Spring, leading to some leftover flowing into North China, whose spring needs high nitrogen fertilizer. Therefore, a large amount of low-cost DAP was sold, substantially increasing spring and summer supply in North China and causing the mismatch between supply and demand during the gap period in spring and summer.
Domestic phosphate imports and exports
China’s phosphate fertilizer is export-oriented, with few imports every year. And high product quality and the output sufficient for domestic market lower the advantages and dependence of fertilizer import. Therefore, the imports are negligible compared with phosphate fertilizer exports. According to the customs, from Jan to Nov in 2022, the imports of MAP were 400 tons, a year-on-year growth of 1 358.20%; while the imports of DAP were 300 tons, rising 6 004.77% from one year ago. In the same period, the exports of MAP and DAP were 1 875 100 tons and 3 326 800 tons, respectively shrinking 50.10% and 46.51% from one year earlier. Though higher than one year ago, the imports growth in 2022 was limited, just slightly affecting domestic market.
Regarding the imports, in 2022 the country which mainly imported MAP is Kazakhstan, others didn’t have imports. And for DAP, the biggest importer was Russia, others like Belgium and Germany imported very few.
From Jan to Nov in 2022, MAP was exported to over 90 countries and regions, with Brazil having the biggest share of 705 200 tons, accounting for 37.61% and ranking top. Followed by Australia and Argentina imported MAP of 286 300 tons and 208 600 tons, accounting for 15.27% and 11.12% respectively. The MAP exports for other more than 80 countries were few and dispersed. Compared with 2021, Brazil and Argentina are still major powers to import MAP in Latin America.
DAP was primarily exported to India with 1 138 900 tons, accounting for 34.23%, followed by Bangladesh and Thailand with exports of 604 600 and 272 900 tons, accounting for 18.17% and 8.20% respectively. Other countries also sporadically imported few DAP. The Key factor is China can provide stable exports for India and Bangladesh which are major DAP export destinations with high demand traditionally.
According to traders ranking for MAP and DAP, the global need is essentially met. The 2 key factors of exports reduction, one is the export policy adjustment which replaced commodity inspection by legal inspection and took more time; the other is unstable international demand that reduced partial areas purchasing and changed international trading flow.
Domestic phosphate fertilizer consumption
MAP is applied to narrow areas. Except export, as for domestic consumption, most MAP is used in compound fertilizer, bulk blending fertilizer, and few for firefighting, new-type fertilizer and new energy. MAP is mainly for industry but limited for agriculture. Therefore, regarding MAP consumption, industry has a greater share of about 65%, while other usages account for a little proportion. In 2022, MAP industry consumption was about 7 000 000 tons, jumping 1.74% from a year ago. And total MAP consumption was 9 000 000 tons, with a year-on-year decline of 15.65%.
Apart from the exports, more than 90% of DAP is used in agriculture, the remaining tiny amounts are for compound fertilizer and bulk blending fertilizer. Based on the statistics of recent 5 years, domestic DAP consumption has decreased, which on one hand was related to the adoption of the export legal inspection policy. On the other hand, after several years of fallow rotation and planting structure adjustment, the demand of DAP obviously reduced but water-soluble fertilizer surged in some regions, and some areas of field crops have declined. Also, emergencies increased raw material price and production cost, making the downstream market reluctant to purchase expensive sources. As a result, the number of purchases has fallen. According to Sublime China Information, total consumption of DAP in 2022 was about 11 700 000 tons, falling 12.10% year over year, of which the agricultural consumption was 7 700 000 tons, rising 9.22% from a year earlier. And DAP seized some market share of compound fertilizer because its price was more affordable than compound fertilizer.
Phosphate fertilizer market forecast in 2023
The phosphate market's supply and demand have altered significantly in recent years due to changes in the external environment, such as policy changes and emergency events. And the sales model of production enterprises and traders have changed, bringing some effect to market supply and demand. It is projected in 2023 that there will be an oversupply of phosphate, but with strict control on production storage, the gap between supply and demand will close. And market supply and demand adjustment will make phosphate fertilizer’s price more flexible.
With the rapid development of ferrous lithium phosphate over the years, some large enterprises of phosphate fertilizer have shifted their focus to new energy, while others have transformed from single conventional fertilizer enterprises to large groups of multi-fertilizer, fine chemicals and new energy. As new energy advances, so does the demand for high-quality mineral and phosphoric acid. In the era of high profits, the ferrous lithium phosphate enterprises can make more money, causing a tight supply of high-quality mineral in phosphate fertilizer production. And the development of new energy will bring new profit growth to phosphate fertilizer enterprises.
