Declining Phosphate Fertilizer Supply Increases Price Value; Self-Supplied Phosphorus Ore Enterprises Have Significant Cost Advantages.

Introduction: The demand for phosphate fertilizer is closely related to food security and is relatively rigid. With the continuous reduction in supply, phosphate fertilizer prices are expected to remain at a relatively high level.

Key Points:

1. The supply of phosphate fertilizer continues to decrease, with new production capacity being limited, leading to a high price level.
2. China has an oversupply of phosphate fertilizers. The production process leads to environmental problems such as phosphogypsum. Domestic policies targeting ammonium phosphate are becoming stricter. Outdated capacities are being limited and gradually phased out, leading to a continued reduction in supply. In 2022, the capacities for monoammonium phosphate and diammonium phosphate in China were 19.45 million tons and 21.12 million tons, with outputs of 9.28 million tons and 12.98 million tons, respectively, reflecting a change of -12.46% and +1.76% from 2018. Since 2016, with the implementation of the "three phosphorus" rectification, stricter environmental and energy consumption policies, and ammonium phosphate being restricted, the country has issued documents to strictly control the addition of new ammonium phosphate capacities and accelerate the phase-out of inefficient capacities. However, the demand side of phosphate fertilizer, closely related to food security, remains rigid. As the supply continues to decline, phosphate fertilizer prices are expected to remain high.
3. From January to August 2023, there was a recovery in phosphate fertilizer exports, which is expected to relieve domestic supply pressure.
4. In September 2021, 13 departments, including the National Development and Reform Commission, issued a notice to ensure the supply and stabilize the price of domestic fertilizer for the foreseeable future, including the implementation of statutory inspections on the import and export of fertilizers. After the export of fertilizers changed to legal inspections, the inspection time was extended. In 2022, the export volumes of monoammonium phosphate and diammonium phosphate in China decreased by 46.9% and 42.8%, respectively. Domestic companies voluntarily reduced production to alleviate supply pressure. According to Zhuo Chuang Information, from January to August 2023, the export volume of monoammonium phosphate in China increased by 15.2% year-on-year, and that of diammonium phosphate increased by 51.0%. This year, there has been a rebound in phosphate fertilizer exports, which helps to alleviate domestic supply pressure.
5.  Phosphorite is the largest cost item in the raw materials of phosphate fertilizer, and enterprises with self-supplied phosphorite have a significant cost advantage.