Phosphorus Industry China Monthly Report 1701

Date: 2017-03
Pages:31
Price:

“Recommended article for Chinese Phosphorus Industry 1702:

Chinese fertiliser export volume decreases significantly in 2016

Summary: A YoY decrease of 22.41% in the volume of fertiliser exported from China was witnessed in 2016. Chinese fertiliser export prospects for 2017 do not look positive either due to the higher cost of production domestically compared with overseas.

According to China Customs, China exported 26.83 million tonnes of fertiliser in 2016 (excluding ammonium chloride and potassium nitrate), down by 22.41% YoY. The main fertiliser types exported included diammonium phosphate (DAP), monoammonium phosphate (MAP), superphosphate, urea and ammonium sulfate. Particularly, the export volumes of MAP, DAP and urea were 2.10 million tonnes, 6.80 million tonnes and 8.86 million tonnes, down by 17.3%, 15.3% and 35.6% YoY respectively.

According to CCM’s research, the Chinese fertiliser export business reached a turning point in 2008, after which China became one of the largest fertiliser exporters in the world. Domestic fertiliser output that year exceeded domestic demand, creating a surplus, and many enterprises eased their increasing inventory pressure by exporting, a trend which has continued since then. Prior to 2015, China’s export volume was growing steadily. In 2015, China exported 34.58 million tonnes of fertiliser valued at USD10.88 billion, up by 18.78% and 21.78% YoY respectively, with both the volume and value reaching new highs. Such large increases in export volume and value in 2015 can mainly be attributed to the following two reasons:

1. In 2015, different export tariff rates for low and peak seasons were abolished, and a uniform tariff rate was used across the whole year.
2. A number of companies increased exports, a result of output increasing despite weak domestic demand.

Conversely, in 2016, Chinese fertiliser enterprises witnessed extensive losses and the value and volume of exports from China decreased significantly. CCM believes that this was due to the following:

1. International demand for fertiliser was weak due to the low price of grain. Previous research had shown that an obvious decrease in fertiliser demand would closely follow a decline in field crop prices.
2. New international fertiliser capacity kept rising. For example, capacity in Morocco and Saudi Arabia increased by 1.80 million and 1.40 million t/a respectively in 2016. As supply from the international market swelled, pricing became more competitive.
3. Production costs rose, caused by the gradual cancellation of policies favourable to the fertiliser industry, rising transportation fees, and electricity and raw materials prices. In contrast, the cost of producing fertiliser overseas decreased, due to declining natural gas prices among other factors. Therefore, the competitiveness of Chinese fertiliser weakened in the international market.

Some industry insiders predict that international fertiliser capacity will continue to increase over the next few years, further intensifying overcapacity across the globe. In China, although fertiliser export tariffs are to be lowered this year, this is not expected to greatly affect its export business. What’s more, in the oversea markets, Morocco and Saudi Arabia are proceeding with new fertiliser projects, and keep pricing in line with China’s. In general, the cost of producing fertiliser internationally is much lower than it is domestically, so foreign enterprises are better able to lower prices. As a result, the Chinese fertiliser export business is not predicted to be positive in 2017.

Chinese exports of fertiliser, 2014-2016
Year Export volume(million tonnes) YoY change Export value(billion USD) YoY change
2014 29.11 / 8.93 /
2015 34.58 +18.78% 10.88 +21.78%
2016 26.83 -22.41% 6.54 -39.87%
Note: Excluding ammonium chloride and potassium nitrate
Source: CCM & China Customs”

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