Phosphates activity likely to rise on China low export tax window

16 May 2014 14:49 Source:ICIS News

Focus article by Sylvia Traganida

LONDON (ICIS)--
The low export tax window in China for phosphates opened on Friday, with the focus on India, Pakistan and Bangladesh business, according to market sources. 

Buyers are heard in no hurry to make purchases, as many cargoes have been agreed before the opening of the window and are starting to arrive at their destinations.

Market players said that if India makes purchases fast once the window opens then this will support pricing, but if buyers wait then this could increase downward price pressure. Further pressure on prices is heard building due to large stocks at Chinese ports.

Chinese export tariffs for 2014

 

Off season

Peak season

DAP/MAP

16 May to 15 Oct: CNY 50/tonne

1 Jan to 15 May, 16 Oct to 31 Dec: 15% plus CNY 50/tonne

TSP

5%

NPKs

30%

NPs

16 May to 15 Oct: CNY 50/tonne

1 Jan to 15 May, 16 Oct to 31 Dec: 15% plus CNY 50/tonne

PKs

5%

Source: China Customs data from Global Trade Information Services (GTIS)

Chinese producers are expected to export less
diammonium phosphate (DAP) to India than last year due to stricter regulations on quality, and are thus seem to be competing for DAP/monoammonium phosphate (MAP) 10.50/MAP 11.44/ nitrogen phosphorous potassium (NPK) business in South America, where prices are heard to be increasing.

The amount of phosphates that China will export remains unclear, however major buyer India is estimated to forecast about 4.5m-5m tonnes of DAP for 2014 compared to 3.3m tonnes last year, with 60-70% of its requirements coming from China.

Stocks are heard to be building at Chinese ports, with talk of 400,000-500,000 tonnes already lined up waiting for export and this is weighing on the market, with prices in all regions still under pressure. However, China is seeing increasing competition in India from Jordan and Saudi Arabia. There is also speculation in the market that the Indian government has enforced stricter regulations on the quality of DAP that is imported into the country from China, which will have an effect on exported volumes from China.

In terms of DAP/MAP production, China remains the world leader. There is a continued shift towards DAP/MAP production in China while NPK, triple super phosphate (TSP) and single super phosphate (SSP) production all remained stable or declined so far in 2014, as China moved to more high-analysis fertilizer production.

Production rates in China have been reduced recently, with large producers heard to be operating at 70-80% of capacity and mid/small-sized producers at lower rates, which might also help relieve inventory pressure once the export window opens.

China is the world’s largest exporter of DAP with a 26% market share, and its phosphate industry continues to expand, but at a more subdued annual growth rate compared to those seen in the past decade. About ten new units were expected to come onstream in 2013-14.

In 2013, China expanded its low export tax window by a month, but producers have not seen the high amount of exports that they were expecting due to minimal demand from India.

However, the lowering of the export tax and the extension of the window by a month since 2013 has already prompted increased exports of DAP in 2014 compared to last year. Exports of DAP in March 2014 totalled 243,605 tonnes, down from 252,758 tonnes in February but up steeply from the 42,012 tonnes exported in the same month last year.

In the first three months of 2014, China exported 623,650 tonnes of DAP, a sharp rise from 160,462 tonnes during the same period in 2013. There are also estimates that TSP and NPK exports will boom given the flat tax all year.

Following the opening of the low export tax window the international sulphur markets remains very much in a wait-and-see mode as the Asia market waits to see how strong phosphate demand will be.

“The Chinese requirement is over now for sulphur and the bulk of the exports [of phosphates] will go to India ,” said a sulphur trader supplying both China and India.

The trader said that much of the focus was now on phosphate prices rather than negotiations over the value of sulphur.

Meanwhile, a Russian sulphur supplier expects to see sulphur prices increase and demand improve as the market moves towards the third quarter on the back of a lift in demand.

In recent months sulphur supplies have moved from a tighter position to a more balanced one following a heavy period of spring refinery turnarounds and most sources expect sulphur availability to remain steady.

In Europe and North America the sulphur markets are stable, but eyes remain focused on what will happen in China for sulphur and in India for phosphates.

A major buyer consuming sulphur in Europe described the sulphur market as being like “a coin on its side”, with a potential for the market to fall either way.

Sulphur is currently valued at $145-170/tonne CFR (cost and freight) China, with prices in the Middle East at $129-145/tonne FOB (free on board).

Additional reporting by Julia Meehan

By Sylvia Traganida