China’s Phosphate Producers Likely to Curb Production in 2018

China’s total fertilizer output hit its lowest point in 2017 over the past nine years, due to more stringent environmental protection inspections and higher pollutant discharge standards, which have eliminated outmoded fertilizer capacity from the market, according to market intelligence firm CCM.

“Supply-side structural reform has further reduced domestic capacity. On top of that, operating rates of China’s fertilizer industry remained low in 2017 because of smaller demand triggered by falling grain prices,” CCM said.

At the end of February, the National Bureau of Statistics of the People’s Republic of China issued the Report on National Economy and Social Development in 2017, revealing an overall fertilizer output of 61.84 million tonnes, a drop of 9.43 million tonnes from 2016.

According to CCM:

“As environmental protection and work safety inspections become more frequently in China, phosphate fertilizer companies are likely to curb production. Also, the elimination of outmoded capacity will continue in 2018, leading to balanced market supply and demand. Prices of raw materials such as phosphorus ore and synthetic ammonia are possible to rise in 2018. Therefore, the operating costs of phosphate fertilizer manufacturers will keep an upward trend, forcing them to quote for higher prices. The actual transaction prices, on the other hand, will also be determined by downstream demand and market supply. Along with the fertilizer output, China’s fertilizer exports decreased as well. China exported 2.25 million tonnes of fertilizers in Dec. 2017. In the past 12 months, China’s overall fertilizer export volume and value declined by 8.9% YoY and 7.1% YoY. The trend has shown the accuracy of the predictions by CCM that were made in early 2017.

“According to CCM’s predictions, the year 2017 would show a significant decrease in the output, demand, as well as the export volume of fertilizers in China. The main factor, that would have a huge impact on the trend was the effort of China’s government in implementing new environmental protection measurements. The reasons that the whole market will remain on a low level in China in 2017 have been analyzed to be mainly due to the continuing process of de-capacity.”

 

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