With the Operating Load Declining, Will the Monoammonium Phosphate Market Be Supported?

Since December, the capacity utilization rate of China's domestic monoammonium phosphate industry has continued to fall. Enterprises have increased equipment shutdowns and production cuts. The operating load has dropped by more than 5% compared with last week. It is also the first year-on-year decline since mid-July, which is 3% lower than the same period last year.

(Comparison chart of China's ammonium phosphate production capacity utilization rate from 2022 to 2023)

Towards the end of the year, the capacity utilization rate of the monoammonium phosphate industry dropped to 53.61%, a decrease of 5.58% from last week, and a year-on-year decrease of 3.12%; the weekly output of monoammonium phosphate was approximately 209,400 tons, a decrease of 21,800 tons from the previous week, a decrease of 9.43% , a year-on-year decrease of 14,500 tons.

With the escalation of weather warnings in various places and the impact of poor overall downstream demand, the pressure on monoammonium phosphate factories to receive orders continues to increase, inventories are gradually increasing, and the operating loads of some factory units are still under pressure to decline, and the overall supply side will continue to shrink.

So amid the sluggish demand trend, can the reduction in supply bring some support to the sluggish monoammonium phosphate market?

1. The factory’s pending shipment volume and operating load decreased simultaneously

(Statistics on the shipment volume of ammonium phosphate sample companies in 2023）

The capacity utilization rate of the domestic monoammonium phosphate industry is trending downward and is heading towards 50%. The supply side has indeed shrunk significantly. However, due to sluggish demand, the factory's pending shipments have declined significantly. From the tracking of the sample company's pending shipment data in the chart above, we can see that since the third week of November, the sample company's pending shipment volume has entered a continuous downward trend. As of the fourth week of December, the sample company's pending shipment volume was approximately 300,000 tons, a drop of more than 56% from the highest point, most of the sample companies' ready-to-ship shipments have been reduced to several thousand tons, and some companies are accumulating inventory.

2. Factories wait for downstream demand

(Monthly inventory of downstream sample companies of ammonium phosphate in 2023)

After mid-November, the demand for monoammonium from downstream compound fertilizer companies continued to slow down, and the news affected purchasing mentality.

In addition, under the influence of factors such as the declining trend of various raw materials, the continuous decline in grain prices, low enthusiasm for stocking at the grassroots level, and the fact that some raw material purchases have been completed in the early stage, the monoammonium phosphate market has limited new transaction volume, and the overall demand has been sluggish.

The sluggish market has lasted for more than a month. Downstream compound fertilizer companies are still waiting and watching, mainly digesting early raw material inventories. Recent inventory data statistics of sample companies have also seen a significant decline, with a drop of more than 22% from the end of last month. Demand in the Northeast market is also sluggish, and it is reported that there is still a raw material gap of more than 40%. In addition, the 2024 Lunar New Year is in early February, and pre-holiday raw material stocking may occur in January. Therefore, the downstream gap still exists, and industry players are still waiting for the emergence of demand.

In January 2024, the capacity utilization rate of the monoammonium phosphate industry is still expected to decline. If downstream compound fertilizer companies need to purchase and follow up at the same time, the price of monoammonium phosphate may briefly stabilize after a sustained decline. Specifically, we will continue to pay attention to the impact of news such as the pace of raw material procurement by compound fertilizer companies, fluctuations in upstream products, and related products.