The MAP Market Is to Hover at a Rational Price Level in the Second Half This Year
Year:2018 ISSUE:17
Click:291    DateTime:Sep.05,2018

By Wang Shikui, China National Chemical Information Center

The price of MAP in China has presented a rising trend since July this year. Main reasons are two. One is that environmental protection has caused shutdown or production reduction to some producers. The other is that phosphate rock has supply shortage. Most of phosphate mines in Hubei, in particular, are still not in operation. The market supply is tense and the price is going up. Some MAP producers have used the chance to push up price offers of MAP. It is however expected that the price rise can hardly last long. The market will sooner or later return to the rational price level.

Overview of the market in the first half this year

   The overall market of MAP in China had a trend of constant reduction in the first half this year. After the first day of the year, the market of MAP was on the whole functioning at a high level. On the one hand, pushed by the demand of downstream compound fertilizers and the brisk season of winter reserves, the operating rate in MAP producers was around 70%. On the other, prices of raw materials were still at a high level. Prices of phosphate rock, sulfur and liquid ammonia were no longer firm, but the reduction margin was not big in January. With dual pressures of safety and environmental protection, almost all phosphate mines in Hubei stopped operation and the supply of resources was tense. There were very few new transactions in February and producers were mostly honoring previous orders. During the Spring Festival in February highway transport vehicles were reduced, railway wagons were hardly available and producers of downstream compound fertilizers halted their purchase activities. When the Spring Festival was over, the transport situation was improved and the operating rate in MAP producers also started a slow pickup. Producers of downstream compound fertilizers, however, said that the market this year was extremely difficult to maneuver, the traditional brisk sales season in spring failed to appear and most producers of compound fertilizers had a high inventory. The price of MAP made another drop in April and the average reduction margin exceeded RMB150/t. More granular MAP was exported and MAP producers turned their attention to the international market. What should be noted was that stimulated by the price rise of urea the price of raw material liquid ammonia also started to go up. The price of phosphate rock remained to be stable. The price of sulfur had a trend of stableness with reduction. The market of MAP made a further rebound after May, but the increase margin was only RMB50-80/t, being not as strong as expected.
   The price rebound this time was the result pushed by a combination of various factors. First, the price drop of MAP in the first half this year started from March, being earlier than previous years. Second, the price reduction margin was bigger than expected. In such case, most MAP producers selected production restriction, production reduction or shutdown for overhaul to cope with the situation and focused on the reduction of their inventory. The direct consequence is the constant reduction of the market supply amount. Third, the export amount made some increase. Fourth, the price rebound of raw materials led to a higher cost of MAP. The price increase margin of liquid ammonia was the most evident. Fifth, with the holding of the “SCO Summit” in Qingdao producers of downstream compound fertilizers increased their purchase of raw materials and the market of MAP was somewhat promoted. Sixth, when the price almost touched the cost line most MAP producers used the more rational measure of “basing sales on production” to release working capital pressure and inventory pressure.
   The market trend of MAP in China was not satisfactory in the first half this year. As the market price of MAP was always maintained at a high level in autumn last year, advance overdraft was made to favorable factors of the market in spring this year. By the end of March the total export amount of MAP in China was 340 kt, a drop of nearly 30% from 480 kt in the same period of last year. It was mainly resulted from impacts of following factors. First, the demand was slack in the international market. Brazil as one of major destinations for the export of MAP in China produced the greatest impact on the overall export situation. Second, due to environmental inspection the operating rate of MAP producers was not high. Production was mainly to satisfy the domestic demand and the export amount was reduced. Third, the tariff reduction of downstream compound fertilizers led to a drastic increase of the export amount. MAP was converted inside China into compound fertilizers for export. The export amount of MAP was therefore reduced. Fourth, prices of raw materials were maintained at a high level, the price of MAP was forced to make an increase and the export competitiveness in the international market therefore had constant weakening.

Forecast to the market in autumn and winter reserves this year

   To the market of MAP in China, the second half of a year is a brisk sales season in the traditional sense. There is a brisk season for the use of fertilizers in winter wheat in autumn and what is more there is also a brisk season for winter reserves. At that time the market development of MAP will be smoother and the price will also hopefully have the glory seen last year.
   Price: There are many factors influencing the price of MAP, but the key factor remains to be the demand of downstream compound fertilizers. Since autumn last year the market sales of compound fertilizers in China have always been slack. The most important reason is the huge capacity of compound fertilizers and the low price of agricultural products. The supply is almost unlimited whereas the demand has been further squeezed. The brisk season is therefore never seen in the market. MAP as one of raw materials has suffered considerable impacts. It is expected that the price of MAP in autumn and even in winter reserves can hardly surpass the high level seen at the beginning of this year.
   Supply: Statistical data show that the total output of MAP in China was 4 330 kt during January-May this year, a drop of 7.3% from the same period of last year and the average monthly output was 870 kt. By the end of May the inventory of MAP was around 350 kt. It is expected that the social inventory of MAP will be around 300 kt at the end of September. The supply amount for winter reserves at the end of December will be around 3 100 kt.
   Demand: The unduly high price of MAP this year has inhibited the increase of the export amount. In case the cost makes no reduction, there will still be not many chances for export in the second half this year or even at the year end. It is expected that the domestic demand of MAP will be around 2 800 kt from June to the end of September and around 2 250 kt by the end of December.
   Export: The export amount of MAP in China is expected to be maintained at around 1 800 kt at the end of September and reach around 2 200 kt at the end of December, being slightly lower than the same period of last year.
   Import: As foreign products have no great favors in cost-effectiveness, the import amount of MAP in China has always presented a declining trend in recent years. The import amount was only 47 kt in 2017. It is expected that the import amount in the whole year of 2018 will be around 40 kt.
   Overall, the market demand of MAP in China will be quite stable with no big ups and downs this year. Major factors influencing the market trend will still be the change of the operating rate and the change of the cost brought by export and environmental protection. It is expected that the output of MAP in China in the whole year of 2018 will be 10 810 kt, the consumption will be 8 330 kt and the export amount will be 2 200 kt.