Since the beginning of this year, the international price of diammonium phosphate (DAP) has surged dramatically, driven largely by the U.S. market, which has seen its prices reach historic highs. Year-on-year increases have surpassed 70%, and the supply and demand dynamics are extremely tight. This upward trend in global DAP prices has also pushed up domestic prices in China, with exports performing strongly.
What has caused this sharp rise? And can the DAP market continue to climb after mid-2007?
A major driver behind the surge is the bio-energy boom, especially in the U.S., where increased demand for corn and other crops for biofuel production has significantly boosted fertilizer demand. FOB prices in the U.S. Gulf region have climbed from $255 per ton in January to over $440, a jump of more than 70%. While rising raw material costs have played a role, the key factor remains the growing demand for fertilizers linked to bioenergy.
In addition, rising shipping costs have further pressured prices. For example, freight from the Gulf of America to Chinese ports has increased from around $48 to $70 per ton. These factors contribute to higher import costs and support the current high price levels.
Looking ahead, international DAP prices are expected to remain elevated through summer and autumn. Although raw material costs like ammonia and phosphoric acid are relatively stable, sulfur prices have spiked due to supply disruptions in Canada, where a strike has caused shortages and pushed prices from $45 to as high as $100 per ton. Given these cost pressures, it's unlikely that DAP prices will fall significantly in the short term.
On the demand side, global fertilizer demand is expected to keep increasing, fueled by the continued growth of the biofuel industry. In the U.S., corn planting for biofuels now accounts for 20% of total corn acreage, and this is projected to rise to 35% in the next few years. Similar trends are observed in South America, Asia, and Europe, all contributing to sustained fertilizer demand.
Despite a temporary slowdown in April due to a lack of large orders, the situation improved in May when India signed a 1.1 million-ton DAP import contract with the U.S. Phosphate Export Association at around $420 per ton. This deal set a strong benchmark for summer and autumn prices, reinforcing the expectation of high prices in the coming months.
However, the market may see a turning point by late September. As U.S. demand cools down from peak season and India’s large contract is fulfilled, pressure on prices could ease. Additionally, some traditional buyers in the U.S. and North Africa have already sourced DAP from China due to cost considerations. If demand weakens and no new large orders emerge, prices may eventually decline.
Domestically, the export boom has driven up DAP prices in China. Exports have surged, with prices rising from around $290 to $430–$450 per ton. Despite a 10%-20% export tariff introduced in June, many companies managed to export before the policy took effect, allowing them to enjoy tax-free shipments. Even with the tax, the effective price remains much higher than domestic agricultural prices, maintaining strong export enthusiasm.
According to customs data, DAP exports in the first five months reached 551,440,000 tons, a 50% increase compared to the same period last year. With 300,000 tons already declared for shipment, the export momentum is strong. Meanwhile, some manufacturers have shifted production to monoammonium phosphate (MAP), which is not subject to export taxes, leading to a rapid rise in MAP exports as well.
Domestic DAP prices have also risen steadily, with prices in the Yunnan-Guizhou region increasing from 2,300–2,350 yuan to 2,500–2,550 yuan, a 10% rise. With the autumn planting season approaching, and ongoing export orders still being fulfilled, the market remains tight, and prices have recently increased by 20–30 yuan.
Raw material costs, particularly sulfur, have been a major contributor to rising production expenses. Sulfur prices in Vancouver have soared, pushing Chinese port CIF prices from $90 to $160–$170, while transaction prices have climbed to 1,200–2,000 yuan. A drop in sulfur prices could help reduce production costs, but for now, the cost structure supports high DAP prices.
Looking ahead, if international DAP prices stabilize and export taxes are reduced to 10% by October, more companies may shift from winter storage to export, further tightening domestic supply. With an estimated annual DAP demand of 6 million tons and production expected to reach 6.8 million tons in 2007, domestic supply will be tight, especially with reduced imports due to high global prices.
Additionally, the shift to compound fertilizers by farmers and distributors, driven by rising prices of monoammonium and potassium fertilizers, has led to reduced compound fertilizer production. This weakens the substitution effect on DAP, supporting its price.
In conclusion, the domestic DAP market this fall is likely to remain tight with prices continuing to rise. Key variables include potential declines in sulfur prices and possible government policies to curb exports.
KTS High Performance Extruder Series
High Performance Extruder,Plastic Extrusion Machine,Aluminum Extruders,Custom Plastic Extrusion
Jiangsu Kunwei Langsheng Equipment Technology Co., Ltd , https://www.kunweilanxess.com