UpdateChina phosphate duty may curb exports

15 February 2008 13:38  [Source: ICIS news]

(Releads, updates with latest fertilizer and sulphur prices plus specific detail on duties in second, third and fourth paragraphs)

 

By Florence Tan

 

SINGAPORE (ICIS news)--China Customs raised taxes on phosphate fertilizer exports to a hefty 35% on Friday but opinion was divided as to whether this would curb outflow as prices continued to reach record levels in the international market.

 

Specifically, the government raised the export duty from 20% to 35% on diammonium phosphate (DAP) and monammonium phosphate (MAP) fertilizers, effective from February to September.

 

Duty was also raised to 35% on complex phosphate blends, namely nitrogen, phosphate and potash (NPKs), nitrogen phosphate (NPs) and phosphate potash (PKs).

 

Triple superphosphate (TSP) and single superphosphate (SSP) were left tax exempt.

 

The higher tax rate would be in effect from 1 February to 30 September but it would return to 20% in the last three months of the year, China Customs said.

 

The cost of exporting phosphate fertilizer worked out to about $670/tonne FOB (free on board) China after including the 35% tax and transport fees to move the material, Harry Yang, an executive director at China’s largest fertilizer distributor Sinofert, said.

 

Although margins had narrowed, some producers might continue to export as it was still profitable, he added.

 

Phosphate prices out of the US had hit $800/tonne FOB (free on board) for DAP this week and prices in China were around CNY 4,100-4,200/tonne ($($570-584/tonne) ex-works, according to global chemical market intelligence service ICIS pricing.

 

Conversely, Chinese authorities were determined to halt exports of fertilizers in order to ward off a forecasted shortfall of 1.5m tonnes of DAP in the domestic market for the coming spring season, trader sources said.

 

Some domestic producers earlier commented that even if the latest round of duty hikes did not have the desired effect, the likelihood was that the government would merely raise duties again.

 

China exported nearly 3.8m tonnes of DAP/MAP last year and tightened supply locally, prompting the government to slap a 20% tax at the start of 2008. However, market sources said this failed to stem the outflow, causing the tax to be raised to 35%.

 

“Two factors - transportation costs and international prices - will determine if exports will continue,” Yang said in Mandarin.

 

The cost of sulphur, one of the feedstocks in the fertilizer, had surged 10-20% from last year to over $600/tonne CFR (cost and freight) China in February, sources added.

 

It now accounted for 50% of the fertilizer’s production cost, up from a third, Yang said.

 

Sinofert exported over 100,000 tonnes of phosphate fertilizers last year mostly to India, Pakistan and southeast Asia but Yang declined to say how much it had sold at the start of 2008.

 

However, an official from Sanning Chemical, a phosphate fertilizer producer in Hubei province, said the high tax rate, which cut into margins, would be a deterrent.

 

Besides, local fertilizer demand, which usually peaked in the first half, would reduce exports, he added.

 

A reduction in China’s output due to the recent snowstorms could also deter exports, producers said.

 

Dolly Wu and Mike Nash contributed to this article

 

($1 = CNY7.19)

By: Florence Tan
+65 6780 4359

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