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Phosphorus Industry China Monthly Report 1608

LONDON, Oct. 18, 2016 /PRNewswire/ -- In Aug. 2016, fertiliser storage for increasing demand in autumn began. However, limited transactions showed that the Chinese ammonium phosphate market remained stagnant.

In Aug. 2016, the adjustment of chemical fertiliser export tariffs has been widely discussed within the industry. The majority of industry insiders have reached the consensus that tariffs on exports of chemical fertilisers should be withdrawn in 2017.

In H1 2016, Hubei Xingfa recorded YoY falls in its revenue and net profit as a result of the depressed phosphate fertiliser market. However, CCM believes that its complete business layout covering the whole phosphorus chemical industry chain will boost its financial performance in the future.

In Aug. 2016, the CISIA held a representative meeting in Lanzhou, listing a series of key measures to speed up the elimination of outmoded production capacity of inorganic salts.x

In Aug. 2016, the local government of Fuquan City, Guizhou Province disclosed that various measures will be taken to promote the transformation and upgrade of the local phosphorus chemical industry. CCM predicts that local leading phosphorus chemical enterprises such as Wengfu Group and Guizhou Chuanheng will gain great support from the government.

In Aug., 2016, China released an initiative to guide the shift towards industrial circular development, and solicited public opinion, planning to build a preliminary national industrial system geared towards environmentally friendly, low-carbon, and circular development by 2020. CCM believes that this will accelerate the elimination of outmoded phosphorus chemical production capacity in China.

In Aug. 2016, the State Council of the P.R.C. released the Guidelines on Structural Adjustment, Transformation and Efficiency Improvement for Petrochemical Industry. Notably, the Chinese government will enhance its support on international cooperation on chemical fertiliser production.

In Aug. 2016, Hubei Xingfa announced that it would invest USD3.77 million (RMB25 million) in the development of black phosphorus, a new two-dimensional semiconductor material, and put it into industrial production, aiming to consolidate its leading position by holding the most advanced technology in the industry and seize additional business opportunities.

In July 2016, China's phosphorus ore market continued to be stagnant due to the depression of the yellow phosphorus and ammonium phosphate markets. The market price of phosphorus ore may further slip in the near future because enterprises' production costs are reduced following the implementation of the new resource tax on 1 July, 2016.

In July 2016, China's phosphoric acid market remained depressed and market prices of the product all dropped slightly in each major production areas. CCM predicted that the market will not be able to recover in the short term considering the dropping yellow phosphorus price and the continuous low phosphate operating rate.

China's ammonium phosphate market remains stagnant in Aug. 2016

In July and Aug. 2016, influenced by the EI Nino, there were heavier rains than usual in Southern China, leading to different degrees of flood disasters and significantly harming agricultural production in many regions. As a result, China's ammonium phosphate market remained stagnant and transitions were very limited even if the fertiliser storage for increasing demand in autumn had already begun.

- Monoammonium phosphate (MAP)

Sales were dull and the market price kept falling. As of mid-Aug. 2016, the average quotation for 55% MAP powder stood at USD252/t (RMB1,670/t), down 1.76% MoM. The main reason for this was that compound fertiliser manufacturers had sufficient inventory and purchased limited MAP, according to trade source.

- Diammonium phosphate (DAP)

The domestic market was so depressed and manufacturers suffered heavy pressure from their inventory and from downstream companies' requests for lower prices. As of mid-Aug. 2016, the average quotation for 64% DAP was USD338/t (RMB2,240/t), down by 6.67% MoM. In this context, many manufacturers mainly focused on their export business. However, there were also limited new orders. The FOB price was between USD327-330/t.

"DAP manufacturers are facing more serious challenges in sales than in previous years. The market price may continue to fall considering that market conditions will not recover in the short term," commented trade source to CCM, "What's worse, the ex-works price of 64% DAP in some regions may even drop to as low as USD302/t (RMB2,000/t)."

According to CCM's research, recently, the Chinese government has been carrying out environmental protection inspection in chemical fertiliser enterprises in Henan Province and then in Hubei Province later. According to trade source, many enterprises have been forced to suspend production for transformation and upgrade so far. This helps to ease overcapacity in the market and ammonium phosphate manufacturers are able to reduce inventory more quickly, supporting the market to recover.

In addition, from 1 July, 2016, phosphorus ore is taxed by value instead of by volume, the mineral compensation expenses of all resource categories are cut down to zero, collection of the price regulation fund is stopped and the local charging funds set up illegally and targeted at minerals are cancelled.

These are favourable for phosphorus ore enterprises and help them reduce production costs. For phosphate fertiliser enterprises, their costs for purchasing phosphorus ore also decline which means bigger profit margins for them. For example, Hubei Xingfa Chemicals Group Co., Ltd. expected to reduce its tax by USD3.02 million (RMB20 million) in 2016 after the phosphorus ore resource tax rate was cut from 10% to 7%.

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