Urea
Domestic fertilizer prices in China remain high compared to historical levels, although export restrictions have leveled off the peak.
Current ex-works price of urea is around RMB 2,800/t ($415/t), which is higher than the global FOB offer of $400/t. This could mean that global prices have lost their previous inflationary risk.
In 2023, China urea production is expected to grow by 1-2 million tons (increase by 2%-4% YoY). Following the easing of the epidemic policy, cross-regional logistics are likely to return to normal, so domestic supply is likely to be relatively adequate throughout the year.
Therefore, it is highly likely to relatively ease the restrictions of urea export in 2023. And it is not in the form of official announcements, but in the form of easier export inspections.
Diammonium/Monoammonium
The situation for diammonium/monoammonium is quite different. Ex-works prices for diammonium/monoammonium are about RMB 4,000/t ($592/t) and RMB 3,400/ton, respectively. The global offer is much higher, at about $700/t.
Similarly, the domestic market for phosphate rock appears to remain tight due to increased mining costs and stricter regulations.
High input prices (phosphate ore purchased from third-party mines) and relatively low domestic diammonium/monoammonium prices have dampened producers' margins and prevented them from expanding sales.
As a result, China domestic prices are below global levels and the market is reported to be tight. Argus expects these restrictions to continue at least through April.
Forecast for domestic fertilizer exports in 2023
As of urea, Chinese exports are likely to be close to the pre-22 levels. In diammonium/monoammonium, there may still be a global shortfall of 3 million tons of product. However, this situation is dynamic and may change in the future.
In 2023, diammonium/monoammonium will still face a significant shortage, mainly due to export restrictions from China, recovering demand from Brazil (and possibly Pakistan), and increased domestic consumption in the US (and reduced exports).
Comments