China takes steps to slow phosphate exports

Reuters – China is rolling out a quota system to limit exports of phosphates in the second half of this year, analysts said, citing information from the country’s major phosphate producers.

The quotas, set well below year-ago export levels, would expand China’s intervention in the market to keep a lid on domestic prices and protect food security while global fertilizer prices are at near record highs.

Why it matters: China’s decision to slow phosphate exports could further tighten fertilizer supplies and keep prices at record levels.

Last October, China also moved to curb exports by introducing a new requirement for inspection certificates to ship fertilizer and related materials, contributing to tight global supply.

Fertilizer prices have been buoyed by sanctions on major producers Belarus and Russia, while surging grain prices are boosting demand for phosphate and other crop nutrients from farmers around the world.

China is the world’s biggest phosphate exporter, shipping 10 million tonnes last year, or about 30 per cent of total world trade. Its top buyers were India, Pakistan and Bangladesh, according to Chinese customs data.

China appears to have issued export quotas for slightly more than three million tonnes of phosphates to producers for the second half of this year, said Gavin Ju, China fertilizer analyst at CRU Group, citing information from about a dozen producers who have been informed by local governments since late June.

That would mark a 45 per cent drop from China’s shipments of 5.5 million tonnes in the same period a year ago.

The National Development and Reform Commission, China’s state planning agency, did not respond to a request for comment on its quota allocations, which have not been announced publicly.

Top phosphate producers Yunnan Yuntianhua, Hubei Xingfa Chemical Group and state-owned Guizhou Phosphate Chemical Group did not answer calls or declined to comment when contacted.

Analysts at S&P Global Commodity Insights said they also expect a quota of about three million tonnes in the second half.

Although China has imposed export duties on fertilizers in the past, the latest measures mark its first use of inspection certificates and export quotas, analysts said.

Other major producers of phosphates, such as widely used diammonium phosphate (DAP), include Morocco, the United States, Russia and Saudi Arabia.

The surge in prices in the last year has raised concerns for Beijing, which seeks to guarantee food security for its 1.4 billion people even as farm input costs surge.

Domestic Chinese prices remain at a significant discount to global prices, however, and are currently about US$300 below the $1,000 per tonne quoted in Brazil, incentivizing exports.

China’s phosphate exports rose in the first half of 2021 before dropping off in November, after the requirement for inspection certificates was introduced.

DAP and monoammonium phosphate exports in the first five months of this year totalled 2.3 million tonnes, down 20 per cent from a year ago.

Export restrictions will support high global prices, even as they weigh on demand and send buyers looking for alternative sources, analysts said.