Brief Review of China's Yellow Phosphorus Market in 2010   

By Guoxi Cai, Report Editor   China Chemical Reporter
We recently notice the domestic price of yellow phosphorus has been stabilized, keeping at RMB16 000 per ton in main production regions such Yunnan, Sichuan and Guizhou province, southwest China, and also it was considered that the price ranged in a high-risk area by the weakening demand. Unfortunately, there is no one could provide precise conclusion to predict yellow phosphorus price in 2011 before it really happened at the end of the day, but taking a brief review of the stories in the past year seems necessary and quite useful as year 2011's reference. (All figures originated in CCR)

Data in 2010

Statistics from official authority show in 2010 China produced 855 733 tons of yellow phosphorus that 162 900 more than in 2009 and the annual capacity reached 2.2 million tons. The export volume took over 4% of total output with bringing approximately US$100 million, but China was still the largest yellow phosphorus export country in global market. Fig 1 shows the countries those imported China's yellow phosphorus in 2010 and its ratio occupying totals (14 countries included).

Energy saving for yellow phosphorus production

The year 2010 was the termination of Chinese "Eleventh Five-Year Program" and the policy in terms of "energy saving and emission reduction" forced numbers of factories shut-down or half open in order to complete target of energy cost, although it was beneficial for the entire China's industry. As a high energy consumer, there was no reason for yellow phosphorus industry not to follow what the policy said, thus caused a large amount of yellow phosphorus factories had to take a short break from the second half of 2010. Especially in main production regions, such as Yunnan and Guizhou provinces, it was reported operation rate was less than 40% at the period of August and September. From Fig 2 below, the situation would be easily described.
    On the other hand, the policy also impacted many industries that have strong dependence yellow phosphorus on like phosphate, pesticide intermediate and phosphoric acid, which is believed to take another responsibility of yellow phosphorus downturn. Fig 3 shows the price of yellow phosphorus in Guizhou province, one of a main production region of China in 2010.

"Spontaneous Combustion" and the "hot money"

On Jun 3, 2010, a "Spontaneous Combustion" accident of yellow phosphorus happened on a freight train that on the way from Yunnan province to Liaoning province and it received temporary limitation for transportation of Yunnan's yellow phosphorus, which caused nearly half of domestic yellow phosphorus output was unable to delivery and made a rebound of price from the bottom (see Fig 3).
    However, it must have another reason for the sharply increasing of yellow phosphorus from June to September in 2010 because the limitation of transport just last less than one month. Besides, according to official report, the demand for yellow phosphorus was weak in that period and "energy saving" policy not yet promote to yellow phosphorus producers. Therefore, it left only one reason for the price increasing - the coming of "hot money".
    It had another "Spontaneous Combustion" accident happened on December 2, 2010 and it caused the transportation limitation for Yunnan's yellow phosphorus been activated again lasting to Feb, 2011. Unlike previous one, the accident didn't stimulate increasing of yellow phosphorus price. There might be two reasons to explain the circumstance: First, there is no large space for the "hot money" because yellow phosphorus standing in a high price, second, it already has sufficient storage of yellow phosphorus made in the year past.
    Overall, people is able to take "Spontaneous Combustion" and the "hot money" as key words to summary the situation of China's yellow phosphorus in the year 2010.

Capacity control

From 2008, China has set an aim to eliminate outdated yellow phosphorus plants and it made great progress in closing numbers of small factories. However, it provided a fairly good opportunity for large factories being able to expand their capacities. By the end of 2010, China owned yellow phosphorus capacity of 2.2 million t/a despite just 0.65 - 0.7 million tons being required in domestic market while the export is expected to reduce in the next few years due to developing yellow phosphorus markets overseas.
    Taking 2010's output as an example, it has nearly 0.9 million tons of yellow phosphorus produced and assumed 0.68 million tons for domestic need, it left 0.22 million tons including half of them have to been collect as storage, thus leaving extra 0.1 million at the end of the year. Therefore, the problem to solve in 2011 will be to find the way to go for the rest of yellow phosphorus before making more.

What should we need?

It wastes time and cost to repeat the cycling of problems we meet every year; obviously it is a time for the whole industry to do something different before a bigger problem coming. The following tips should involve one or more to make a breakthrough for yellow phosphorus producers:

    1. A regular market
    2. Reasonable management
    3. Polices to limit "hot money"