The price of fertilizers that are highly correlated with commodity prices has fluctuated greatly in the past two years and reached a historical high in 2022. Can the fertilizers market return to normal in 2023 and what trends can we expect in the price of domestic fertilizers?
According to interviews with industry professionals conducted by CaiLian, the capacity gap for fertilizers is expected to be filled in 2023, leading to more stable prices. In the early part of 2023, the demand for fertilizers during the winter storage and spring planting season may cause prices to increase, but the fading impact of the pandemic and the addition of new capacity are expected to alleviate the previously tight supply and demand situation.
It is generally believed in the industry that the prices of fertilizers will continue to experience seasonal fluctuations in 2023 according to planting patterns. “During the peak season, prices are likely to rise to some extent, but they should not exceed previous highs,” said some market participants.
Looking back at the 2022 fertilizers market, it can be described as a rollercoaster with large fluctuations that left various links in the industry chain at a loss.
Under the overall theme of stable prices and supply, coupled with the recovery of production capacity, industry insiders generally believe that after the peak season, there will be a certain degree of downward adjustment in the fertilizers market in 2023. In addition, adjustments have also begun at the top level of import and export policy.
On December 29, the Tariff and Taxation Commission of the State Council released a notice that import and export tariffs for some products will be adjusted in 2023. From January 1, 2023, zero tariffs will be implemented on potassium chloride and potassium sulfate, while quotas and provisional rates of 1% will continue to be applied to urea, compound fertilizers, and ammonium dihydrogenphosphate.
Zhuochuang Information analyst Li Feng believes that if the annual potassium fertilizers contract price of $590/ton and the import volume of 8 million tons are calculated, the import cost can be saved by $47.2 million if tariffs are eliminated. For terminal farmers, the domestic cost of using potassium fertilizers per ton can be reduced by CNY 30-40/ton.
The adjustment of China’s import tariffs on potassium fertilizers to zero is intended to alleviate the domestic shortage of potassium fertilizers, further utilize the ability of the state reserve and light storage to regulate the market, reduce the cost of using domestic potassium fertilizers, and ultimately safeguard food security.
Looking at nitrogen fertilizers, about 70% of domestic production relies on coal, so the rise in coal prices has increased the cost pressures on domestic nitrogen fertilizers producers. As the profit margins of smokeless coal-based urea companies are currently close to or even lower than the breakeven point and the spring planting season is approaching, many brokerages expect nitrogen fertilizers prices to continue to rebound in the next few months, but not exceed the 2022 high.
In the case of phosphorus fertilizers, the price has dropped significantly from its previous high due to the reduction in raw material costs. In July, the price of sulfur, a key raw material in the production of diammonium phosphate and monoammonium phosphate, plummeted by more than 70%, but has slightly rebounded in recent months. The supply of phosphorus fertilizers in 2023 will inevitably be looser than in 2022, mainly due to the decrease in the prices of raw materials for producing phosphorus fertilizers and the improvement in production technology, which have reduced the production costs of phosphorus fertilizers.
“The production of basic fertilizers will enter a stable stage, and producers should turn to deeply layout new fertilizers such as compound fertilizers, slow-release fertilizers, and controlled-release fertilizers,” said some analysts.