Shifting Market Dynamics of Phosphoric Acid in China

In the third quarter, the offers for Phosphoric Acid in the Chinese domestic market soared to a historic high amidst the stricter implementation of the “dual control in energy consumption” to curb the rising emission and restrict power consumption. As the running natural gas stock was inadequate to support the industrial and commercial consumption against the persistently falling temperature in China. The situation further worsened after the heavy rainfall waterlogged the coal mines in Shanxi province in northern China, in response operations in 60 coal mines were forced to shut down, which accounted for 9% of the province total. The closure of coal mines further stressed the supply chain as the Chinese energy supplies were already strained. As a repercussion, the numerous manufacturing plants across the Chinese provinces were forced to either curtail the operational load or temporarily suspend the operational load amidst the power rationing.

The Chinese Phosphoric Acid market is proportionally impacted by the imposition of new norms and power rationing across several provinces in China. Therefore, the offers for Phosphoric Acid witnessed an accelerated hike in the quoted offers of Phosphoric Acid, and the domestic quotations for Phosphoric Acid soared by 159% to USD 2670 per tonne in a short period of 2 months. Currently, the inadequate demand from the fertilizers industries due to the ongoing offseason in China dropped the producer's offers of Phosphoric Acid by 15.74% to USD 2250 per tonne on 10^th December.

The diversification of Phosphoric Acid application in LFP (Lithium-Iron-Phosphate) batteries changed the market dynamics of Phosphoric Acid and downstream DAP (Di-Ammonium Phosphate) Fertilizers industry. In 2021 alone, 300,000 tonnes of Phosphoric Acid had shifted out of agricultural fertilizer production to Lithium-Iron-Phosphate batteries production, which equates to the curtailment of about 499,927 tonnes of DAP production. Currently, China is responsible for one-third of world exports of DAP and MAP amounting to 4.57 million tonnes per year. Several market experts were sincerely concerned about its impact and the analyst in the Indian market stated that the shortage of DAP may lower its consumption in FY 2022 in India. In addition, the EV’s giant Tesla recently stated that they were in the process of switching all of its standard range vehicles to LFP batteries globally has further solidated the sentiment of LFP manufacturers in China.

As per ChemAnalyst, the current shift of the market dynamics of Phosphoric Acid will drastically pressurize the availability of DAP and MAP across the globe. However, it is anticipated that the players having DAP plants with backward integration will likely reap higher benefits in the upcoming period.