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China’s phosphate industry in major supply/demand shift

The Chinese phosphates business has seen a massive transformation over the last two decades in terms of the overall phosphate supply/demand balance, the make-up of production and consumption, the phosphates trade balance, as well as company ownership and supply chain.

On the demand side, Chinese phosphate fertilizer demand has grown dramatically from around 5-6 million tonnes of P2O5 in 1990, to roughly double that amount in recent years. This is as global consumption of phosphate fertilizers was relatively static.

At the same time, the make-up of Chinese phosphate fertilizer demand has changed significantly from relatively low-analysis products like SSP and fused magnesium phosphate (FMP) to higher analysis products such as TSP, MAP, DAP and NPK.

There has also been a substantial change to the supply side of the Chinese phosphates business. The most notable development is a major scaling up in output. Phosphate rock production has increased from around 30 million tonnes in 2000, to approaching 70 million tonnes in 2010 and likely approaching 80 million tonnes in 2011.

The amount of phosphate rock upgraded domestically has accelerated at an even faster rate. Production of DAP and MAP combined has increased by roughly sevenfold to 22 million tonnes, and created a significant surplus to domestic requirements. Consequently, exports of DAP increased from a negligible amount 10 years ago to 4 million tonnes in 2010.

Prohibitive export taxes remain in place in 2012 in order to secure domestic fertilizer supplies.

Our analysis has highlighted that DAP production has been generally more profitable than MAP production for Chinese producers over the period 2006-2010 because of lower MAP prices and historically lower DAP production costs.

Integer Research
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