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Potash Supply Tight in 2H 2008
On 15 April 2008, BPC agreed to sign a new annual potash contract with China. The contract price
is $400/t higher than last year, and shipments will occur from June/July till December 2008.
Because of the prolonged negotiations and tight supply in international markets, BPC will ship
only 1m tones to China in the second half of 2008.
Meanwhile, Canpotex agreed to ship 1mt of MOP to China’s Sinofert by the end of 2008. The new
agreement also reflects a net price increase of $400/t over last year’s contract price. It is estimated
that China’s imported MOP will be priced at $640-655/t CFR, equal to RMB 4,470-4,580/t CFR
based on the prevailing midpoint rate of RMB 6.99 to the US dollar. At present, the MOP
wholesale prices offered by domestic distributors have already reached RMB 4,500/t in China’s
ports.
China’s MOP contract price has increased significantly, but the volume imported will decrease
notably. According to the data published by China Customs, Canada shipped 1.23m tones of MOP
to China, and Russia shipped 1.5m tones during July-December 2007. However, MOP suppliers in
Canada and Russia will ship only 1m tones to China respectively in the second half of 2008,
resulting in a total supply reduction of 700,000t compared with the prior-year contract. China
imported 2.3m tones of MOP from Canada and 3.2m tones from Russia in 2007. Comparing the
data mentioned above, it is apparent that China’s MOP import will drop sharply, and the domestic
supply will be very tight in the second half of this year.
News Flash
○ A special Tariff of 100% on Fertilizer Exports
Approved by the State Council, China will impose a special tariff of 100% on fertilizer exports
based on the existing tariffs in the period from 20 April to 30 September 2008. Exports of all
fertilizer products and related raw materials will be subject to the revised policy. The following
table shows the tariff adjustments.
Product HS Code Original tax rate,% Special tax rate,% Revised tax rate,%
phosphoric acid 28092019 0 100 100
ammonia 28141000 0 100 100
28142000 0 100 100
nitrogen fertilizer 28271010 0 100 100
28271090 0 100 100
31021000 35 100 135
31022100 0 100 100
31022900 0 100 100
31023000 0 100 100
Trade News
Urea: Affected by a 135% export tax on urea introduced by NDRC on 20 April and effective till
30 September 2008,the ex-factory urea prices in Shandong Province fell to RMB 2,000-2,050/t
from RMB 2,250, even before the new policy went into effect. Given the pessimistic outlook in
the domestic market, distributors are in a panic to sell cargos, but there is no interest from
downstream industries and end users. Because most distributors’ stock of urea was purchased at
high prices several months ago, the wholesale prices have not moved down significantly despite
slow trade. On the export market, offers should be over $670/t if a 135% of tax rate is imposed.
According to provisional statistics on urea exports for March, China exported about 570,000t of
urea during March, brining the total in the first quarter this year to 2.27mt, up 279.6% from the
prior-year period.
According to provisional statistics on phosphate exports for March, China exported about 61,700t
of DAP during the month, bringing the total to 377,100tt in the first quarter this year, up 95.90%
from the prior-year period. China exported about 100,000t of MAP in March and exported a total
of 358,000tt in the first quarter this year, up 113.1% from the same prior-year period.
Potash: As a result of China’s new MOP import contract, offers of Russian red MOP rose to
RMB 4,250/t this week, up from RMB 4,000/t early last week. Qinghai Salt-lake Group has not
announced its new ex-factory prices. It is rumored that the contract prices of trade at the Russian
border will continue to surge in May 2008.
Sulfur: As phosphate export rapidly grinds to a halt, sulfur consumers will be under much
greater pressure because of market shrinkage. This week, the prices of spot sulfur increased to
$730-740/t CFR. The tight supply and high prices have forced many domestic phosphate and
sulfur acid producers to cease production, and as a result, sulfur demand will drop in the near
future.
The China’s government announced that no sulfur will be imported from Kazakhstan from 1 May
to 1 August. Some market players believe that the new regulation will lead to a much tighter
supply in the domestic market. China imported 37,000t of sulfur from Kazakhstan in February,
accounting for 3.8% of the total import.
Fertilizer Project
Migao to Construct 120,000tpy Sulphuric Acid Project
Migao Corporation announced that it will construct a 120,000tpy sulphuric acid project at the
Economic and Development Park in Yingkou City of Liaoning Province, where its subsidiary,
Liaoning Migao Chemical Ltd is based. Construction of the US$8 million project is scheduled to
begin in May 2008 and be completed in February 2009. Sourced locally in Liaoning Province, the
pyrite supply will be assured in a long term for the new sulphuric acid unit. Sulphuric acid
produced at Liaoning Migao will supply the potassium sulphate production both at Liaoning
Migao Chemical Ltd and Migao’s another subsidiary, Migao Chemical (Changchun) Ltd, located
in Changchun City of Jilin Province. Liaoning Migao Chemical Ltd has a SOP capacity of
40,000tpy and Migao Chemical (Changchun) Ltd has a SOP capacity of 80,000tpy.
Strategy
Agrium Set Up New Company in China
Agrium announced its plan to set up Jiayang China Co., Ltd. with its own capital on 11 April and
named Dr. Huang Binghui as the president of the new subsidiary company. Jiayang China will be
engaged in fertilizer production, purchase and sale in the Chinese mainland.
According to Wei Shengmao, the CEO of Jiayang China, there are many fertilizer producers in
China, but they are scattered. It is a good chance for Agrium to expand its fertilizer businesses
though acquisition and integration. Given that raw materials prices continue surging and fertilizer
prices and exports strictly are controlled by the Chinese government, Jiayang China will seek
cooperation with existing producers, especially nitrogen fertilizer makers, instead of investing in a
new plant because of low margins.
Acquisition and integration are the major global methods for Agrium to expand its businesses.
Agium has made seven acquisitions since 1994, with $4 billion investment and stretched into
Argentina, Chile, America and China. For example, Agrium purchased a 19.6% share in Hanfeng
Evergreen in China in 2007.
Analysis
SOP (K2O 50%) The wholesale prices of SOP (K2O 50%) were in a range of
RMB3450-4800/t in the domestic markets on 16 April. In Yutian area, Hebei Province, the
wholesale price of SOP (Taiwanese product) remained at RMB4300/t, and the wholesale price of
SOP (white, German product) increased from RMB4500/t to RMB4800/t. In Yantai area,
Shandong Province, the wholesale price of SOP (local product) increased from RMB4500/t to
RMB4700/t, and the wholesale price of SOP (imported from Russia) increased from RMB4800/t
to RMB5000/t. In Zhengzhou area and Xinxiang area, Henan Province, the wholesale price of
SOP (local product) increased from RMB3350-3450/t to RMB3450-3550/t. In Mengcheng area,
Anhui Province, the wholesale price of SOP (produced in Shandong Province) increased from
RMB4150/t to RMB4400/t. In Xuzhou area, Jiangsu Province, the wholesale price of SOP
(produced in Luobupo, Xinjiang Uygur Autonomous Region) increased from RMB4150/t to
RMB4400/t.
DAP (P2O5 64%) The wholesale prices of imported DAP products were in a range of
RMB4470-5600/t in the domestic markets on 16 April. In Yutian area, Hebei Province, the
wholesale price of imported DAP (US Cargill) remained at RMB4800/t in the period from 4 April
to 16 April. In Yantai area, Shandong Province, the wholesale price of DAP (imported from Tunis)
decreased from RMB6000/t to RMB5600/t in the same period. In Mengcheng area, Anhui
Province, the wholesale price of DAP (imported from Tunis) remained at RMB4850/t. The
wholesale price of DAP (imported from Tunis) in Xuzhou area, Jiangsu Province increased from
RMB4600/t to RMB4800/t. The wholesale price of American DAP in Taizhou area, Jiangsu
Province increased from RMB4400/t to RMB4470/t. The wholesale prices of domestic DAP
products were RMB4350-4800/t in Zhengzhou area and Xinxiang area, Henan Province,
RMB4400-4500/t in Mengcheng area, Anhui Province and RMB4600-4900/t in Xuzhou area,
Jiangsu Province.
MAP In Qingdao area, Shandong Province, the wholesale price of local MAP product (P2O5
55%) remained at RMB3980/t on 16 April. In Yantai area, Shandong Province, the wholesale price
of local MAP product (P2O5 55%, powder) increased from RMB3500/t to RM4100/t, and the
wholesale price of local MAP product (P2O5 55%, prill) increased from RMB3800/t to
RMB4300/t. In Mengcheng area, Anhui Province, the wholesale price of MAP (P2O5 55%,
NPK (S, 45%) The wholesale prices of NPK (S, 45%, domestic products) were in a range of
RMB3300-3650/t in the domestic markets on 16 April. The wholesale prices of NPK (S, 45%,
domestic products) were RMB3300/t in Yutian area, Hebei Province, RMB3320/t in Qingdao area,
Shandong Province and RMB3600/t in Yantai area, Shandong Province. In Mengcheng, Anhui
Province, the wholesale price of NPK (S, 45%, domestic products) was RMB3500-3650/t. In
Huaibei area, Anhui Province, the wholesale price of NPK (S, 45%, domestic products) was
RMB3500/t. In Yantai area, Shandong Province, the wholesale price of NPK (S, 45%, imported
from Russia) remained at RMB4500/t.
Urea (N 46%, domestic products) The wholesale prices of urea products were in a range of
RMB1830-2500/t in domestic markets on 16 April. In Shandong Province, the wholesale prices of
urea were RMB1900/t in Yantai area and RMB2220/t in Qingdao area. In Zhengzhou area and
Xinxiang area, Henan Province, the wholesale price of urea was RMB2100-2250/t. In Mengcheng
area, Anhui Province, the wholesale price of urea was RMB2280-2350/t. In Xuzhou area, Jiangsu
Province, the wholesale price of urea was RMB2130-2260/t. In Baoji area, Shaanxi Province, the
wholesale price of urea was RMB1950-1980/t. In Tianshui area, Gansu Province, the wholesale
price of urea was RMB1830/t. In Nanning area, Guangxi Zhuang Autonomous Region, the
wholesale price of urea products was RMB2320/t to RMB2500/t.
(1) Encourage development of flotation projects on mid-low grade phosphate rock resources.
Encourage firms to produce and classify commercial phosphate acid based on new technologies,
and to refine and utilize the wet-process commercial phosphoric acid. Firms are also encouraged
to produce fine phosphate based on commercial phosphate acid, to develop deep and fine
processing projects based on yellow phosphorus, and to produce NPK and special fertilizer
products or other extended products based on phosphate fertilizer or other phosphate chemical
materials. Other projects of comprehensive resource utilization based on solid wastes or tail gas
are also encouraged.
(2) Restrict investment in projects starting from phosphate rock selection and processing.
(3) Forbid construction of new facilities and capacity expansion and revamping of existing
capacity for yellow phosphorus, SSP, calcium magnesium phosphate (CMP).
(4) Control the development of wet-process feed-grade dicalcium phosphate (DCP). The total
capacity of the wet-process feed-grade DCP will be limited to 2mpty, and the location of
production will be restricted to the regions of Huize, Xunmian, Dongchuan and Luquan.
(5) High analysis phosphate fertilizer producers are not permitted to construct new capacity.
Except for energy-saving technological transformation of CMP, capacity expansion will be
(6) By 2012, commercial phosphate rock capacities should be limited to 25mtpy; the total
capacities of wet-process phosphate acid should be kept below 4.5mtpy and high-analysis
phosphate fertilizer restricted to 7mtpy. The proportion of high-analysis phosphate fertilizer
products should be stabilized at over 85% of the total production of phosphate fertilizers.
RMB 1280/t
sharply. Stabilization RMB 1,500/t
Up RMB 100/t
Firstly, increase prices of raw materials such RMB 1,700/t
as sulfur, is the most important cause. Sulfur RMB 1,300/t Up RMB 100/t
Stabilization
imports have dropped significantly since
RMB 1,400/t
January, especially in February and March, Up RMB 100/t
resulting in a very tight supply in the first
quarter this year. The price of spot sulfur imported in April has reached $710/t CFR. Meanwhile,
the ex-factory prices of sulfur averaged at RMB 5,200/t, some as high as RMB 5,450/t. The tight
supply and higher prices of sulfur lead to sulfur acid production cost increases and rising prices.
Second, driven by price increases of sulfur and sulfur acid in international markets, sulfur acid
prices in China have continued to set new records. The increasing demand for fertilizer in
international markets stimulates the sulfur acid consumption, resulting in a sulfur acid shortage
around the world. Rising fertilizer prices also drive sulfur acid prices upward. In addition,
according to some suppliers, ethanol plants
have increased their sulfur acid consumption Figure 2 China's Average Ex-factory Price of Sulfur Acid
1000
800
Third, the sulfur acid supply is tight in the
600
domestic market. The production in the first 400
two months this year totaled 7.97mt, up 200
May-07
Jun-07
Sep-07
Oct-07
Nov-07
Dec-07
Jan-08
Feb-08
Mar-08
Apr-07
Apr-08
Aug-07
Finally, the price increases of energy sources also influence the stabilization of sulfur acid. Oil
prices in international markets are running at record levels, and once reached $110 per barrel. Coal
prices in Asian markets increased to $121/t. Domestic coal prices moved up to RMB 800-1,000/t,
up 51% compared with the same prior-year period. As a result, the prices of all agricultural means
of production are also going up faster than before, including sulfur acid.
Supported by high production cost, domestic sulfur acid prices will continue to increase in the
next two months. It is predicted that fast growth of the fertilizer industry will expand the demand
for sulfur acid. Meanwhile, sulfur prices in the domestic market keep increasing, so sulfur acid
price will also continue to move up.
by 10.5%y/y 1200
Unit: 1000t
1000
China produced 1.079mt (product) of
800
DAP in the same period, up by 10.6%
600
y/y. The output growth was mainly
400
contributed by the DAP production
200
expansion in some producers including
0
Jiangsu Lvling, Hubei Dayukou,
Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec.
Guangdong Zhanhua and Sinochem
2007 2008
Three Circles . Table 1 shows the details
of the DAP production in China.
In the first two months this year, China produced 1.17mt (product) of MAP, a rise of 7.8% y/y.
MAP outputs declined in Guizhou Province and Sichuan Province in February due to the bad
weather. Table 2 shows the MAP productions by producers in the first two months this year.
Statistics compiled by China Phosphate Fertilizer Industry Association show that China produced
more than 4.82mt (product) of NPK compound fertilizer in the first two months of the year, up by
2.7% y/y.
P r i c e Wa t c h
Exchange rate: 1USD=6.99RMB
2000
1900
1800
1700
1600
1500
Aug-07
Feb-07
Jun-07
Jul-07
Sep-07
Feb-08
Jan-07
Mar-07
Apr-07
May-07
Nov-07
Dec-07
Jan-08
Mar-08
Apr-08
May-08
Oct-07
○ Ex-work Prices
Urea, 22 April 2008
Unit: US$/t
Plant Price Plant Price
CNPC Daqing Petrochemical Co 246.8 Hefei Sifang Group 300.4
Jilin Tonghua Chemical Co Ltd 271.8 Sinopec Zhenhai Co 286.1
Liaoning Huajin Chemical Group 271.8 Sinopec Jiujiang Co 286.1
Panjin Zhongrun Chemical Co Ltd 274.7 Guizhou Chitianhua Group Co Ltd 264.7
Inner Mongolia Tianye Chemical Co 271.8 Meifeng Chemical Industry Stock Holding Co Ltd 271.8
Wulashan Fertilizer Plant 271.8 Guangxi Hechi Chemicals 300.4
Hebei Cangzhou Dahua Group 246.8 Jiang’an Chemical Co Ltd 300.4
Hebei Jingxian Fertilizer Co 300.4 Jiangsu Linggu Chemicals 300.4
Shijiazhuang Fertilizer Group 300.4 Yunnan Jiehua Group 257.5
Shanxi Lanhua Sci-Tech Venture Co Ltd 286.1 Yunnan Yunwei Group 264.7
Hunan Yihua Chemical Co 300.4 Fujian Sanming Chemical General Plant 279.0
Shandong Hualu Hengsheng Co Ltd 293.3 CNPC Ningxia Petrochemical Co 246.8
Shandong Lunan Fertilizer Plant 293.3 Weihe Coal Chemicals 246.8
Shandong Tengzhou Ruida Chemicals 293.3 CNPC Lanhua Co 286.1
Shandong Luxi Chemical Group 294.7 Henan Zhongyuan Dahua Group 300.4
Huixian Haolida Chemical Co Ltd 300.4 Henan Anyang Chemical Group 300.4
CNOOC Fudao Chemical Co 246.8 Henan Junma Chemical Group 297.6
Shijiazhuang Fertilizer Plant /23.5% 178.8 Hubei Yihua Co Ltd /25% 186.0
Shanxi Fengxi Fertilizer Industry Co Zigong Honghe Chemical Stock Co
150.2 178.8
Ltd /23.5% Ltd /25%
Chongqing Jian’an Industry General Yunnan Yunwei /25%
171.7 165.1
Co /23.5%
Shaanxi Xinghua Group Co Ltd
Gansu Jinchang Chemical /23.5% 150.2 171.7
/23.5%
Hunan Zhicheng Chemicals Co Ltd Shaanxi Hanzhong Nanhua Group
150.2 143.1
/23.5% /23.5%
Unit: US$/t
Plant Product Price
Shandong Stanley Fertilizer Co Ltd 15-15-15 (Cl) 404.9
Shandong Shikefeng 15-15-15 (Cl) 457.8
15-15-15 (S) 486.4
30-5-5 (Cl) 372.0
Hubei Yihua 15-15-15 (S) 464.9
Shandong Luxi Chemical Group 13-17-15 (Cl) 464.9
45% (Cl) 407.7
CFMW prices are for your reference. CFMW tries our best to ensure the reliability of the information. However,
no guarantees of the accuracy nor any liability for the results obtained by using the data are assumed by CFMW.
Jordan/white MOP -- 60
Beihai Canada/ red MOP 658 10
Yantai Russia/ red MOP 608 18
Russia/ red MOP, granular -- --
Total -- 2130.5