23 January 2008 14:52 [Source: ICIS news]
LONDON (ICIS news)--Beijing is planning to increase export duties on most phosphate fertilizers to 35-45% from the current 20% level in an attempt to curtail exports and stabilise domestic prices, producers and traders said on Wednesday.
The export duty on diammonium phosphate (DAP) fertilizer was only announced late last year, under which it rose to 20% in the first and fourth quarters of 2008 and 30% for the second and third quarters.
However, this has had negligible effect in reining in imports, as Chinese producers still enjoyed far greater profitability in the export market, where prices were $200/tonne higher than in the domestic market.
Under the proposed amendments, any phosphate fertilizer with a P2O5 nutrient content greater than 25% would be subject to a 35-45% export duty. This would bring DAP, together with monammonium phosphate (MAP), triple superphosphate (TSP) and many other phosphate blends within the remit of the duty.
A meeting will take place on 25 January between industry representatives and the government to discuss the DAP situation. Reports conflicted that the proposed duty increase would take effect either from 1 February or from the second quarter onwards.
Political will to support Chinese farmers by price reduction and stabilisation of DAP has appeared to harden, producers said.
Prime minister Wen Jiabao reportedly said that this was a cornerstone of agricultural policy. This followed protests from Chinese farmers at the current domestic price of DAP above CNY4,100/tonne ($567/tonne) ex-works.
Phosphate producers said the tactic was to stop completely the flow of product out of the country. In this climate, all offers of Chinese DAP/MAP to the export market ceased, at a time when DAP is in extremely short supply globally and prices from all sources were at an all-time high. Producers expected the news would tighten the market considerably.
Chinese producers argued that some level of exports were still necessary in order to balance out the high cost of sulphur feedstocks.
Producers were also concered whether restricting phosphate exports contravened ?xml:namespace>
Producers and traders said that the increased duty period may only last a few months, in order to ease supply for the forthcoming domestic spring season.
However, there was consensus that the government would not shy away from increasing duty levels further if exports were not impacted.
($1 = CNY7.24)
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