Chinese fertilizer exports to tumble, even as prices rise, says PotashCorp

PotashCorp forecast a waning threat to Western phosphate and urea producers from Chinese exporters, even as prices of both nutrients continued to improve – although lagging the 28% surge in a week in ammonia values.

PotashCorp – one of the world’s top potash producers, which is also a major force in nitrogen and phosphate markets – forecast that Chinese phosphate exports would fall for a second successive year in 2017, to 7.0m-8.0m tonnes.

In urea, Chinese exports for 2017 will come in at 5.0m-7.5m tonnes, PotashCorp said – again a second year of decline – a period over which, at the lower end of the forecast range, shipments would have plunged by 74%.

The forecasts reflect ideas of Chinese producers of both nutrients being “pressured by costs”, with the price of anthracite coal, for instance, a major raw material for the country’s urea manufacturers, seen by PotashCorp as rising 17.0% to average $124 a tonne this year.

Meanwhile, “increasingly stringent environmental policies” in China are also curtailing output. In urea, “higher production costs and environmental concerns in China forced some producers to idle capacity and some others to permanently shut down,” PotashCorp said, estimating at 52% the proportion of Chinese capacity still in production, down from 62% last year. “It is estimated almost half of the Chinese capacity is curtailed despite a rebound in global urea prices.”

For phosphates, Chinese production ran at a lower rate of capacity last year than in 2015 for every month bar March, when the figure were in line.

With higher costs challenging their export competitiveness, “China’s domestic producers are reportedly working to decrease operating rates which have now trailed historical levels for several months,” PotashCorp said. “Furthermore, government enforcement of environmental regulation reportedly impacted several producers’ ability to produce in the fourth quarter of 2016.”

The data underline the reversal in fortunes facing Chinese fertilizer producers, whose producers enjoyed a surge in export growth over 2013-15, a period in which urea shipments soared 66% and exports of monoammonium phosphate (Map) and diammonium phosphate (DAP), the key phosphate products, by 140%.

Nonetheless, prices of many fertilizers have made a firm start to 2017, with Dap values in the US port of Tampa, at $348 a tonne, up 3.9% over the past week and 10.5% over the past month, according to broker Raymond James

The price rises have left potash by far the worst performer of the major nutrients so far in 2017, in the US at least, with Midwest values flat week on week at $243 a tonne, and down 1.8% over the past month, according to Raymond James.

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