Higher China export tax to curtail further phosphate exports

26 August 2009 17:17  [Source: ICIS news]

LONDON (ICIS news)--The possibility of further export sales of Chinese phosphate fertilizers has evaporated as the country’s export tax is set to rise to in September, Chinese producers confirmed on Wednesday.

The export duty, currently 10%, will rise to 110% on 1 September.

This was in line with the government’s policy, which was originally announced in November 2008, to ensure adequate domestic supply ahead of the September-November autumn season.

Producers said they notionally still want a minimum of $350/tonne FOB (free on board) for diammonium phosphate (DAP), although domestic prices still commanded a premium over exports at this level.

The imposition of the 110% export tax would raise Chinese DAP prices to the extent that they would be unworkable in all export markets.

Chinese traders reported limited movement of phosphate fertilizers to the domestic market.

According to one Chinese producer, there had been some reports of improved monoammonium phosphate (MAP) fertilizer demand.

The producer said this was driven by an uptick in production of blended fertilizers as a result of a lack of DAP in some parts of the north of the country, where DAP producers faced a shortage of phosphate rock.

However, other trader sources denied that MAP producers had significantly increased capacity utilisation to meet this supposed demand; they continued to report that the markets for blended NPKs (nitrogen, phosphate and potash) and MAP were depressed.

Sources said that stocks of imported NPKs were very high, with imports reaching around 760,000 tonnes in the January-July 2009 period, compared with 310,000 tonnes in the same period of 2008.

There was now speculation among sources over how much China would export when the 10% export tax reopened in mid-October.

One trader said that all signs were that producers would remain cautious regarding operating rates.

For DAP, capacity utilisation was still around 60-70% and, unless international prices made exporting viable, sources said they believed that producers’ first response would be to cut output rather than dump product into the export market.

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By: Mike Nash
+44 20 8652 3214

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