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The national fertilizer market has entered a critical phase following the spring and summer domestic market fluctuations. The industry is now navigating a complex landscape of rising phosphate fertilizer prices both internationally and domestically, while also positioning itself to capitalize on emerging business opportunities during the production and sales season.
This spring, the high-concentration phosphate and compound fertilizer market experienced a surge in activity. Due to shifting global supply and demand dynamics, DAP (Diammonium Phosphate) prices skyrocketed starting in February, reaching an all-time high of $430 per ton. Domestic DAP producers secured a large number of export contracts, creating a significant price gap between imports and domestic markets. As a result, import volumes dropped sharply, while exports surged. In the spring, domestic DAP supply reached 2.9 million tons, with imports totaling 960,000 tons. By the end of spring, port and circulation inventories had declined significantly year-on-year. The northwestern region held about 50,000 tons in inventory, while other regions had almost none. Port inventory stood at 167,000 tons, down 36% from the same period last year, signaling improved balance in the domestic DAP market.
The strong performance of the high-concentration phosphate and compound fertilizer market this spring was reflected in reduced stock levels, stable price increases, and a 48% drop in port inventory compared to the same period last year. Two key factors contributed to this trend: first, international prices for high-concentration fertilizers rose sharply since February, prompting domestic companies to secure substantial export orders. According to customs data, from January to June this year, China imported 1.898 million tons of high-concentration phosphorus and compound fertilizers, a 69.11% decrease from 2.0124 million tons in the same period last year. Exports, however, increased by 230.95%, reaching 1.3718 million tons, up from 414,500 tons in the same period last year. This shift led to a 1.778 million-ton decline in domestic supply for the first half of the year.
Second, rising raw material costs have pushed up production expenses. The price of sulfur, for example, increased from $80 per ton at the end of February to $155 per ton today—a 94% rise. Prices of other key raw materials such as coal, oil, phosphate ore, and synthetic ammonia have also risen, further increasing production costs and leading to continued price hikes for high-concentration phosphate fertilizers.
Looking ahead, the phosphorus fertilizer industry is experiencing rapid expansion, driven by growing market demand. In recent years, rising energy prices—particularly for natural gas and oil—have fueled sharp increases in both domestic and international prices for high-concentration phosphate and compound fertilizers, encouraging investment in the sector. Domestic DAP production capacity has grown from 5.5 million tons during the "Eleventh Five-Year Plan" to 7.5 million tons today. By 2006, actual domestic production of high-concentration phosphate and compound fertilizers reached 12.105 million tons, achieving near self-sufficiency. However, the rapid growth in output has intensified competition and led to price wars in the domestic market.
Imported high-concentration phosphate and compound fertilizers, once dominant in the Chinese market, are now facing strong competition from locally produced alternatives that offer better quality at lower prices. While their market share has shrunk, they are unlikely to exit the market in the short term. For many years, imported fertilizers, especially DAP, played a crucial role in shaping pricing strategies. Their listing prices in the U.S. Gulf, seaport shipments, and domestic retail prices have long been reference points for local manufacturers. However, as domestic production expands, import volumes have steadily declined, and these products are gradually losing ground in key regions like Northeast China and Xinjiang.
Domestic companies are also strengthening their brand presence and marketing networks. Over the years, firms like Yuntianhua, Hongfu, and Six Nations have built trust among farmers through consistent product quality and service. This has helped them gain a dominant position in the high-concentration phosphate and compound fertilizer market, challenging the dominance of imported products.
Rising global raw material prices and increased shipping costs have further pressured domestic fertilizer prices. Even with government intervention, it is difficult for domestic high-concentration phosphate and compound fertilizer prices to fall quickly.
In addition, supportive agricultural policies and rising crop prices have provided a strong foundation for the fertilizer market. Policies such as the "three rural" initiatives, tax reductions, and the "building of a new socialist countryside" have boosted farmer enthusiasm for planting, which in turn has driven demand for fertilizers.
Looking ahead, the output of high-concentration phosphate and compound fertilizers is expected to grow steadily over the next three years. Although prices may see some moderation, it is projected that DAP will range between 2,300 and 2,380 yuan per ton, monoammonium phosphate between 1,700 and 1,800 yuan per ton, and compound fertilizers between 1,800 and 2,000 yuan per ton by 2008.
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