Since the start of this year, the international price of diammonium phosphate (DAP) has surged sharply, driven by a strong U.S. market that has seen record-high levels. As of now, year-on-year increases have exceeded 70%, and both supply and demand are experiencing robust growth. This upward trend in global prices has also lifted domestic DAP prices in China, with exports performing exceptionally well.
What factors are fueling this surge? And will the DAP market continue to rise rapidly after mid-2007?
The bio-energy boom is one of the key drivers behind the recent price increase. Since early 2006, FOB prices at the U.S. Gulf have risen from $255 per ton to over $440, marking a more than 70% increase. This surge has had a ripple effect on global phosphate fertilizer markets. While rising raw material costs have played a role, the real catalyst has been the rapid expansion of bioenergy, particularly in the U.S., which has boosted demand for crops like corn. This, in turn, has increased the need for fertilizers, becoming a major factor in the current price spike.
In addition, growing international trade volumes and limited shipping capacity have pushed up freight costs. For example, sea freight from the U.S. Gulf to Chinese ports has climbed from around $48 to about $70 per ton, further increasing import costs.
Looking ahead, the summer and autumn months are expected to see continued high prices. Although raw material costs—such as ammonia and phosphoric acid—are relatively stable, sulfur prices have spiked due to supply disruptions, especially from Canada, where strikes have caused tightness in supply. The sulfur price has jumped from $45 to as high as $100 per ton, contributing to higher production costs.
On the demand side, global fertilizer demand is expected to remain strong, fueled by ongoing biofuel expansion. In the U.S., corn planting for biofuels already accounts for 20% of total corn acreage, and this is projected to rise to 35% within the next three to four years. Similar trends are observed in South America, Asia, and Europe, reinforcing the long-term outlook for elevated fertilizer prices.
Despite a temporary lull in April due to a lack of large orders, the situation changed in May when India signed a 1.1 million-ton DAP import contract with U.S. suppliers at around $420 per ton. This deal set a benchmark for summer and autumn prices, supporting the expectation of sustained high prices.
However, the market may reach an inflection point by late September, when U.S. demand typically enters its off-season and India’s large contract is fulfilled. If demand weakens and no new large orders emerge, prices could begin to decline. Additionally, Chinese exports have already drawn some traditional buyers from the U.S. and North Africa, which could further impact the market.
Domestically, DAP export prices have soared from around $290 to $430–$450 per ton. Despite a government-imposed 10–20% export tariff starting June 1, many companies managed to clear customs before the policy took effect, allowing them to export tax-free. At $450 per ton, even with a 20% VAT, the net price remains significantly higher than domestic agricultural prices, keeping export enthusiasm strong.
According to customs data, DAP exports in the first five months of the year reached 551,440,000 tons—an increase of over 50% compared to the same period last year. With more than 300,000 tons already declared for shipment, the export momentum is likely to continue.
Meanwhile, monoammonium phosphate (MAP) exports have also grown rapidly, with January–May exports reaching 346,300 tons, a similar 50% increase. Some manufacturers have shifted production to MAP to maximize profits, further impacting domestic supply.
Domestic DAP prices have risen steadily, with prices in Yunnan-Guizhou regions climbing from 2,300–2,350 yuan to 2,500–2,550 yuan, a 10% increase. With the autumn planting season approaching, supply remains tight, and prices have recently risen by 20–30 yuan.
Raw material costs, particularly sulfur, have contributed significantly to rising production expenses. Sulfur prices in Vancouver have surged, pushing Chinese port CIF prices to $160–$170 or even higher. Domestic transaction prices have also climbed, reaching as high as 2,000 yuan per ton in some cases. If sulfur prices stabilize, it could help reduce production costs.
With the end of spring sales, distributors usually hold significant inventory. However, this year, much of the stock has been redirected through export channels, reducing available supply in the domestic market. By October, with the export tax rate reduced to 10%, companies may shift winter stock to export, further tightening domestic availability.
China's annual DAP demand is around 6 million tons, with estimated production in 2007 reaching 6.8 million tons—a 800,000-ton increase from 2006. Including estimated exports and conversions to MAP, domestic supply is expected to be around 5.2 million tons. Meanwhile, DAP imports are expected to drop significantly, reducing by over 500,000 tons.
As DAP prices rise, some farmers may switch to compound fertilizers. However, with rising costs of monoammonium and potassium fertilizers, many small and medium-sized compound fertilizer producers have scaled back or halted operations, reducing overall market supply and weakening the substitution effect.
In summary, the domestic DAP market this fall is expected to remain tight, with prices continuing to rise. Potential variables include a decline in raw material prices or new government policies aimed at limiting exports.
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