The
national call for bids for the Commercial Reserves of Chemical Fertilizers
during the Off-Season (Off-Season Reserves) was closed at the end of Oct., and
the local call for birds is open. However, enterprises are hesitant to
participate, according to CCM’s Phosphorus Industry
China Monthly Report 1311.
In
order to stabilize fertilizer prices between peak season and off-season, China
implemented the off-season commercial storage system of fertilizers in 2004. On
Sept. 6, 2013, the National Development and Reform Commission (NDRC) and the
Ministry of Finance of the People's Republic of China (MOF) started the
Off-Season Reserves bidding process for 2013/2014, with a pre-qualification of
the enterprises. According to the NDRC, the reserves will total 18 million
tonnes for 2013/2014 (17.3 million tonnes of Off-Season Reserves and 0.7
million tonnes of phosphate fertilizer special Off-Season Reserves), of which
3.7 to 5.2 million tonnes are estimated to be of phosphate fertilizers. The
figure includes the phosphate fertilizer special Off-Season Reserves, which
comprise mainly high concentration fertilizers such as DAP. The effect of
Off-Season Reserves on DAP was especially significant compared with the effects
on other kinds of fertilizers, because the phosphate fertilizer Off-Season
Reserves account for about 30% of the annual phosphate fertilizer consumption.
Most
of the Off-Season Reserves are allocated to provinces in Northeast and Central
China.
Some
enterprises are quite willing to take part in the Off-season Reserves, for
multiple reasons.
The
first advantage are the abundant low-interest loans offered to participants by
the Chinese government for six months (from Oct. 2013 to March. 2014), coupled
with the low price of phosphate fertilizers in the end of Oct. Considering the
current difficulties in getting low-interest loans and some enterprises'
estimation of a slight decline in phosphate fertilizer prices, taking part in
the Off-Season Reserves will possibly bring high profits.
The
second is the support of the increasing prices of downstream agricultural
products in recent years. In 2004, China first implemented the Price Floor
Policy for Key Grain Varieties (for example, wheat and rice). In 2014, the
price floor for wheat will be raised by around 2 cents/kg, to USD0.385/kg.
Following the uptrend of past years, the rice price floor will also be raised.
The
third is the low inventory of distributors. Given the continuously decreasing
prices of phosphate fertilizers in 2013, fertilizer distributors maintained
their inventory at low levels. This is an incentive for fertilizer
manufacturers to develop Off-Season Reserves, since the demand for the first
high season of 2014 (beginning in March) will be higher than the demand for the
same period in 2013, when distributors' warehouses were fuller.
There
is, however, a number of phosphate fertilizer producers unwilling to develop
Off-Season Reserves due to continually decreasing prices. Between improving
their relationship with local governments in order to enjoy privileges, and not
participating in the Off-season Reserves to avoid large potential losses, some
manufacturers, especially small ones, are likely to choose the latter.
Given
the absolute surplus of phosphate fertilizers, the fluctuation of prices
between off-season and high season will not be substantial. In addition, in an
industry already crippled by overcapacity, the Off-Season Reserves end up
providing a respite to manufacturers still operating obsolete production lines.
This can only be damaging to the fertilizer business as a whole, since it
aggravates the surplus and hinders the overall technological development of the
industry. Some specialists have suggested replacing the Off-Season Reserves
with more effective governmental subsidy mechanisms.
Upon
the whole, most of the eligible manufacturers are quite eager to undertake the
2013/2014 Off-Season Reserves.
MOFCOM
launches the 2014 phosphorus ore export quota application procedure
A
brief analysis of different production methods of phosphoric acid
Phosphorus
enterprises have mixed feelings on Off-Season Reserves for 2013/2014
Shindoo
starts production in two plants and aims to go into phosphorus mining
India
postpones sunset review of anti-dumping duties on Chinese phosphoric acid
imports
Wengfu-Dazhou
and Blue Sword Chemical set up JV to produce fine phosphorus chemicals
Traditional
phosphorus exporting countries under pressure from MENA competitors
WUT
and Hubei Yihua co-develop advanced phosphogypsum-based cementing materials
Brazil
stops probing into China's sodium acid pyrophosphate
International
trade of phosphate chemicals in Sept. 2013
Market
review of prime phosphate chemicals in Oct. 2013
Price
monitoring of some phosphate chemicals in Oct. 2013
Phosphorus
Industry China Monthly Report, issued by CCM on 15th,
keeps providing the latest company dynamics related to China’s phosphorus
industry, and market analysis on supply and demand, import and export as well
as global insight.
CCM is dedicated to market research in China
Guangzhou
CCM Information Science & Technology Co., Ltd.
17th Floor, Huihua Commercial & Trade Mansion, No.80 Xianlie Zhong Road, Guangzhou 510070, China
17th Floor, Huihua Commercial & Trade Mansion, No.80 Xianlie Zhong Road, Guangzhou 510070, China
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