IFA '08: Fears quake will impact phosphate exports

19 May 2008 15:09  [Source: ICIS news]

VIENNA (ICIS news)--China’s ability to export phosphate fertilizers in the fourth quarter, easing the tight supply situation globally, has evaporated due to earthquake damage to key production facilities and transport infrastructure, market players said on Monday at an industry meeting.

 

“We estimated that Sichuan province can produce 1.5 m tonnes of monammonium phosphate (MAP)”, said one global supplier on the sidelines of the International Fertilizer Industry Association conference.

 

With extensive damage to three plants, it was expected that lost output could be at least 700,000 tonnes to the end of the year, the source added of the quake that hit the country’s southwest Sichuan province a week ago killing thousands.

 

“Damage to the mining infrastructure, as well as the rail system, will mean that rock supply to other parts of China will be adversely impacted,” said the source, since Sichuan also produces around 10m tonnes/year of phosphate rock, a feedstock used in the production of phosphate fertilizers.

 

“Not only that, but phosphate producing regions in the south of the country, such as Yunnan province, will be unable to transport product to the consuming northern regions [due to damage to rail systems].”

 

This was not expected to hit domestic supply dramatically, said the source, as the country had already effectively banned exports in April following the introduction of an increased export duty.

 

The consequence for the global phosphate market was considerable, however, the source added.

 

“That could mean a loss of 1m tonnes of diammonium phosphate (DAP) and MAP in the fourth quarter,” the producer said, based on 2007 export levels.

 

China had been due to reduce the rate of export duty on DAP and MAP from 135% at the end of September, in theory making it easier for domestic producers to export more product to the lucrative international market but the disaster made that more unlikely, said the source as the government looked to protect domestic supply through to the spring season next year.

 

“We’ve heard from Chinese authorities that the global market should not expect any DAP/MAP exports from China in the fourth quarter,” the source said.

 

“What this means is that major markets, such as Pakistan, which might have held off from buying until Q4 [the fourth quarter] will move their buying forward before the market tightens further,” the producer said, adding that Pakistan alone was expected to import a further 350,000-400,000 tonnes to the end of the calendar year.

 

“India will take another 900,000-1m tonnes,” the source said.

 

“Both these markets took a lot of Chinese product in 2007 but with China out of the equation that does not leave a lot of options for these buyers,” the source concluded.

 

On a positive note for Chinese producers, the source added the government was reported to have abandoned the domestic ceiling price of yuan (CNY) 4,100/tonne ($588/tonne) EXW (ex-works) in order to provide domestic producers facing higher input costs to recoup some of their margin by moving domestic prices higher.

 

The IFA conference takes place in Vienna from 19-21 May.

 

($1 = CNY6.99)

 

To discuss the effect of the Chinese earthquake visit: The Chinese earthquake on ICIS connect

 

 

 

 

 

 

 

 

By: Mike Nash
+44 20 8652 3214

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly