Daily Management Review

Asian Consumers Of Fertiliser Avoid China, A Major Exporter, As Restrictions Get Tighter


Asian Consumers Of Fertiliser Avoid China, A Major Exporter, As Restrictions Get Tighter
Asian fertiliser customers are looking for alternatives to Chinese suppliers due to worries that the largest exporter in the world has become an increasingly untrustworthy provider as a result of shipments being halted to safeguard its own market, according to importers and analysts.
China is the world's largest exporter of phosphate and a significant producer of urea; but, in an effort to lower local prices, it has implemented export quotas and drawn-out inspection procedures on the components of fertilisers since 2021.
Even if they are higher this year, urea shipments still fall short of the average level of prior years, having decreased by 24% to 2.8 million metric tonnes in 2022 from the previous year.
Although phosphate exports were strong early in the year, they have also decreased recently, which has resulted in a shortage on the world market and an increase in prices.
According to Josh Linville, director of fertiliser at brokerage StoneX Group Inc., China will be an even less dependable supply in 2024 as a result of the government's increasing participation in exports.
"Normally, market factors call the shots on what happens. Now, we have to try and figure out what the central government is thinking and its reaction can swing heavily from side to side. Buyers will have to diversify," he said.
According to LSEG statistics, the price of di-ammonium phosphate (DAP), a global benchmark for the industry, has increased by 26% in the United States since mid-July to $617.30 per tonne.
"The limitations imposed by China are pushing up urea and di-ammonium phosphate prices, but we don't anticipate significant increases," said a senior official with a New Delhi-based fertiliser company.
India is one of the biggest global consumers of fertiliser. According to data published by India's commerce ministry, Chinese urea exports to the nation in the first half of the 2023–24 year, which began in April, fell 58% from the same period the previous year to 335,963 tonnes.
Yet, the source continued, the readily available commodity from other suppliers, such as Russia, Oman, and the United Arab Emirates, is countering the decline in supplies from China.
Malaysian consumers are also moving away from China and purchasing phosphate instead from Vietnam and Egypt, according to Teo Tee Seng, managing director of Kuala Lumpur-based Behn Meyer Agricare, a provider of agrochemicals and fertilisers.
"The global market has been in limbo due to China's export restrictions," he said.
According to traders and analysts, China's sales of DAP and mono-ammonium phosphate (MAP) have decreased recently due to a decrease in local output.
According to Chinese customs data, MAP shipments decreased 10% in October compared to a year earlier, while DAP exports decreased by 12.5%.
"Our normal supplier has reduced their packing size to 8 kilogrammes now, it used to be 25 kilogrammes," said Malaysian importer Ng Wei Houng.
Searching for options, South Korea has also protested to China over urea export delays. It adds urea to diesel fuel and utilises it as a fertiliser.
"We intend to sustain this pattern moving forward by broadening our import portfolio to include countries such as Vietnam, Indonesia, and Saudi Arabia," stated an unnamed representative of a significant South Korean urea distributor who was not permitted to address the media.
According to the government this month, Seoul increased its urea stockpile to guard against the escalating volatility and procured more supplies from Vietnam.
Analysts predicted that China's urea exports in 2024 will rise gradually to 4 million tonnes, although shipments will be constrained in the first half of the year.
According to Gavin Ju, lead fertiliser analyst at CRU Group, China has asked 15 significant fertiliser trading companies to cap their overall exports at 944,000 metric tonnes in 2024. Quotas are anticipated to be issued to other producers.
A request for comment regarding its quota allocations was not answered by China's National Development and Reform Commission.