China 'still a wild card' in the world phosphate market, says PhosAgro

22.03.2018
China is the “wild card” of the phosphate market, threatening an upbeat outlook for prices, PhosAgro said, highlighting a “tight supply-demand balance” for the fertilizer.
 
Russia-based PhosAgro said it was “optimistic on price dynamics” for phosphates, citing the knock-on effect of “inflated” prices of raw materials, besides a squeeze on supplies expected to last into the “beginning of” the April-to-June quarter.
 
“The supply-demand balance in the first quarter and early in the second quarter of 2018 will remain tight in the light of export and production cuts in Tunisia, due to a shortage of phosphate rock production, and Morocco, due to bad weather,” PhoAgro said.
 
The group said that it expected “more upside to prices… as the high season kicks off in Latin America and India”, adding that the market dynamics “may push prices up to $410-415 per tonne”, as measured by values diammonium phosphate, or DAP, in the Tampa export market.
 
That compares with an average price of $364 a tonne in the October-to-December period of last year, although is actually in line with current values.
 
Fertilizer giant Mosaic reports the Tampa DAP price as of last week at $412 a tonne, while broker Raymond James on March 12 reported a price of $414 a tonne.
 
‘Wild card’
 
However, PhosAgro acknowledged a danger to phosphate price growth ahead from China, from where a slump in all-phosphate exports of nearly 30% in the October-to-December period has encouraged market tightness.
 
The weakness - which has been widely attributed to higher costs of coal, a key feedstock for Chinese plants, and to environmental clampdowns – has extended into 2018, although with the early months a seasonally high period for domestic demand, commentators have been reluctant to declare China over as a threat to phosphate prices.
 
“China is still considered the wild card in the phosphate segment, and we will all be paying close attention to Chinese export numbers for April and May,” PhosAgro said.
 
The group added that “we remain confident that ongoing inflation in coal and sulphur prices, combined with significant tightening of environmental regulations in the country, should put additional pressure on production and export numbers in China”.
 
Profits drop
 
The comments came as the group reported a 63% tumble to 4.26bn roubles in earnings for the October-to-December period, despite a rise in revenues of 14% to $45.78bn.
 
The earnings decline reflected in part a hit from a stronger rouble, a setback to a producer of an asset denominated globally in dollars.
 
However, PhosAgro also noted setbacks from bigger raw materials bills, thanks to increased output and rising prices of the likes of electricity and sulphur.
 
PhosAgro shares closed down 1.7% at 2300 roubles in Moscow, a four-month closing low.
 
 

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