Asian Fertilizer Buyers Seek Alternatives to Chinese Supplies

Asian fertilizer buyers are actively seeking alternatives to Chinese supplies as concerns grow over the reliability of the world's top exporter. This follows China's imposition of export quotas and stringent inspection requirements to protect its domestic market and curb rising prices.

Urea Exports Plummet, Phosphate Supplies Squeeze Global Market

The Daily Star noted that the impact of China's export limitations is evident in the steep decline of urea exports, which plunged 24% to 2.8 million metric tons in 2022. Although higher this year, the numbers remain below the average level of previous years. Similarly, although brisk earlier in the year, phosphate exports have been throttled back, causing a squeeze in global supply and subsequent price surges.

The effect of China's restrictions is acutely felt in the rise of prices, particularly for di-ammonium phosphate (DAP), a global benchmark for the industry, as per Reuters. Since mid-July, DAP prices have surged by 26% to reach $617.30 per ton, according to LSEG data. Buyers anticipate further increases due to China's limitations, though not deemed significant.

Buyers Opt for Alternative Suppliers

India, one of the world's largest fertilizer buyers, has witnessed a decrease in Chinese urea exports. In the first half of the 2023/24 year, exports from China to India have plunged 58% to 335,963 tons compared to the previous year. However, India has managed to offset the lower shipments from China by turning to alternative suppliers, including Russia, Oman, and the United Arab Emirates.

Malaysian buyers are following suit and turning away from Chinese supplies. Instead, they are increasing purchases of phosphate from Vietnam and Egypt to meet their fertilizer needs.

The decline in domestic production in China has impacted the exports of DAP and mono-ammonium phosphate (MAP). Data from Chinese customs shows a drop in DAP exports by 12.5% and MAP exports by 10% in October compared to a year earlier.

South Korea, a significant consumer of urea for both fertilizers and as a diesel fuel additive, is actively diversifying its sources. Importing from countries like Vietnam, Indonesia, and Saudi Arabia, South Korea aims to protect itself against rising volatility in urea prices.

Positive Outlook Amidst Transition

While the dependence on Chinese supplies remains a concern, the readiness of alternative suppliers brings a positive outlook for the fertilizer market. Despite the increasing prices and limitations imposed, industry insiders do not foresee significant price hikes, reflecting the adaptability of buyers in mitigating the impact of China's export restrictions.

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