【China Fertilizer Market】 The Price of DAP is Temporary Stable, Maybe a Good Time to Purchase?

June 14, 2020, Beijing,  Fertilizer View by FSHOW

With the completion of multi field wheat harvest, the sales of base fertilizers for summer corn gradually came to an end, and the demand for DAP in industry and agriculture gradually decreased, but its price did not keep falling as it did last year. At present, the ex factory transaction price of 64% DAP in Hubei Province is still stable at 2100 RMB (ton price, the same below), and the pre collection price of 64% DAP in Southwest China is still at a high of 2350-2380 RMB in North China. Although the market is not warm and hot in the near future, a small number of dealers are confident in the autumn market and intend to copy the bottom and enter the market. Is it time to purchase?

At present, the domestic market is in the alternate stage from summer to autumn. The market price fluctuates frequently. After the continuous rise of urea price, it has begun to appear weakness. Does the price decline in the later period? In summer, with the wheat harvest going on, the compound fertilizer market gradually tended to be flat from the south to the north,  and the overall factory operating rate began to decline. On the one hand, due to a large number of orders received in the near future, the price is high and stable, and it is still possible to continue to pull up in the later stage. The potash market has been bottoming out since the signing of the big contract, and the market attention has been increasing. In the whole fertilizer market, only DAP is stuck, some enterprises' quotations have not changed for nearly half a month, and the downstream market is mostly in a wait-and-see state. Where is the market going in autumn?

In terms of demand, due to the relatively high international price this summer, most enterprises shifted their sales focus to the export market, especially in Hubei Province, where the domestic market of some factories was once in short supply. Due to the impact of less domestic transportation in summer, most industry experts believe that the demand for DAP in this autumn is significantly better than last year, and the overall sales volume is expected to increase. However, in autumn, the final use of fertilizer should wait until the Oct 1, National day holiday. 

The raw material price is running at a low level, and the cost support is insufficient. In the near future, the price of granular sulfur in the port has stabilized at 660 RMB, while that in the Puguang Wanzhou port and Dazhou plant has stabilized at 690 RMB and 590 RMB, respectively. China's total sulfur port stock is still over 2.7 million tons. In addition, under the influence of the epidemic, the commodity market is poor, so it is difficult for the sulfur price to increase significantly in the later period. In terms of liquid ammonia, although it has recovered in some areas recently, it is also far below the average price of 3000 RMB in the same period last year. In addition to the stable price of phosphate rock, the prices of sulfur and liquid ammonia are far lower than the same period last year, and the subsequent prices are difficult to rise, and the raw material cost is difficult to support the DAP market in autumn.

Export demand remains, but the overall price is difficult to rise sharply. At present, the main reason why the price of DAP in China has not declined is that most of the enterprises export well and the situation that the supply exceeds the demand in the domestic market has been alleviated to a certain extent. However, the FOB price of DAP in China is only stable at US $304-308, far lower than US $350 in the same period last year. This price is only about 2100 RMB when it is converted to the factory price of enterprises in Hubei Province. Even considering that the export goods are mostly in bulk and cash payment, it is difficult to provide a greater support for the price of DAP in autumn. Although there is still demand in the international market, the overall supply has not declined, and it is difficult for subsequent prices to rise sharply.

To sum up, the autumn market is far away, the overall production cost of DAP is at a low level, and the export price is difficult to increase. Although the demand in the future is optimistic, the possibility of a sharp increase is low, and it is still necessary to be cautious in preparing goods in advance.                                    

June 14, 2020, Beijing,  Fertilizer View by FSHOW