China’s DAP production falls by half on high costs

25 June 2008 15:14  [Source: ICIS news]

LONDON (ICIS news)--China phosphate fertilizer production has fallen by about 50% due to concerns over high sulphur feedstock costs, a slow domestic market and the aftermath of the Sichuan earthquake, two Chinese fertilizer producers confirmed on Wednesday.

 

Chinese fertilizer producers were facing an increase of at least $100/tonne on third- quarter sulphur contracts to $800-825/tonne CFR (cost and freight) based on tight supply globally.

 

At the same time, the recent earthquake in Sichuan province was thought to have taken 1m tonnes of phosphates out of the supply chain due to damage to production facilities and transportation problems.

 

Diammonium phosphate (DAP) producer Kailin was operating at below 50% of capacity, according to a source at the company.

 

Kailin has the capacity to produce 900,000 tonnes/year of DAP.

 

Another major DAP producer, Wengfu confirmed that it would restart one line at its DAP plant in early July following extensive planned maintenance. Currently it was running at 50% of capacity at its 1.2m tonne/year plant but was undecided about production rates once the line restarted.

 

Kailin sources confirmed that DAP inventories were rising as the government effectively turned a blind eye to domestic prices moving above the official DAP ceiling price of CNY 4,100/tonne ($597/tonne) ex-works (EXW) to allow fertilizer producers to recoup some margin.

 

However, there was scant interest in DAP even at official prices, as the domestic market was off-season.

 

With no export outlet due to the extra 100% export duty on phosphate fertilizers effectively banning exports, it meant Chinese producers could not take advantage of considerably higher international DAP prices. Producers were trying to balance production with input costs in the domestic market. 

 

The government’s recent decision to exempt fertilizer producers from the increase in electricity costs was providing little relief, producers said.

 

($1 = CNY 6.87)

 

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By: Mike Nash
+44 20 8652 3214

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