Although some phosphorus enterprises estimate that China's phosphate fertilizer market will continue to decline, most companies still choose to bid for the Off-Season Reserves to counter the current difficulties.

1. Phosphorus enterprises have mixed feelings on Off-Season Reserves for
2013/2014
Summary: Although some phosphorus enterprises estimate that China's phosphate fertilizer
market will continue to decline, most companies still choose to bid for the Off-Season Reserves
to counter the current difficulties.
Tags: phosphorus enterprises, off-season, reserves, fertilizer prices, phosphate fertilizer
The national call for bids for the Commercial Reserves of Chemical Fertilizers during the
Off-Season (Off-Season Reserves) was closed at the end of Oct., and the local call for birds is
open. However, enterprises are hesitant to participate, according to CCM’s Phosphorus
Industry China Monthly Report 1311.
In order to stabilize fertilizer prices between peak season and off-season, China implemented
the off-season commercial storage system of fertilizers in 2004. On Sept. 6, 2013, the National
Development and Reform Commission (NDRC) and the Ministry of Finance of the People's
Republic of China (MOF) started the Off-Season Reserves bidding process for 2013/2014, with
a pre-qualification of the enterprises. According to the NDRC, the reserves will total 18 million
tonnes for 2013/2014 (17.3 million tonnes of Off-Season Reserves and 0.7 million tonnes of
phosphate fertilizer special Off-Season Reserves), of which 3.7 to 5.2 million tonnes are
estimated to be of phosphate fertilizers. The figure includes the phosphate fertilizer special
Off-Season Reserves, which comprise mainly high concentration fertilizers such as DAP. The
effect of Off-Season Reserves on DAP was especially significant compared with the effects on
other kinds of fertilizers, because the phosphate fertilizer Off-Season Reserves account for
about 30% of the annual phosphate fertilizer consumption.
Most of the Off-Season Reserves are allocated to provinces in Northeast and Central China.
Some enterprises are quite willing to take part in the Off-season Reserves, for multiple reasons.
The first advantage are the abundant low-interest loans offered to participants by the Chinese
government for six months (from Oct. 2013 to March. 2014), coupled with the low price of
phosphate fertilizers in the end of Oct. Considering the current difficulties in getting low-interest
loans and some enterprises' estimation of a slight decline in phosphate fertilizer prices, taking
part in the Off-Season Reserves will possibly bring high profits.
The second is the support of the increasing prices of downstream agricultural products in recent
years. In 2004, China first implemented the Price Floor Policy for Key Grain Varieties (for
example, wheat and rice). In 2014, the price floor for wheat will be raised by around 2 cents/kg,
to USD0.385/kg. Following the uptrend of past years, the rice price floor will also be raised.
The third is the low inventory of distributors. Given the continuously decreasing prices of
phosphate fertilizers in 2013, fertilizer distributors maintained their inventory at low levels. This

2. is an incentive for fertilizer manufacturers to develop Off-Season Reserves, since the demand
for the first high season of 2014 (beginning in March) will be higher than the demand for the
same period in 2013, when distributors' warehouses were fuller.
There is, however, a number of phosphate fertilizer producers unwilling to develop Off-Season
Reserves due to continually decreasing prices. Between improving their relationship with local
governments in order to enjoy privileges, and not participating in the Off-season Reserves to
avoid large potential losses, some manufacturers, especially small ones, are likely to choose
the latter.
Given the absolute surplus of phosphate fertilizers, the fluctuation of prices between off-season
and high season will not be substantial. In addition, in an industry already crippled by
overcapacity, the Off-Season Reserves end up providing a respite to manufacturers still
operating obsolete production lines. This can only be damaging to the fertilizer business as a
whole, since it aggravates the surplus and hinders the overall technological development of the
industry. Some specialists have suggested replacing the Off-Season Reserves with more
effective governmental subsidy mechanisms.
Upon the whole, most of the eligible manufacturers are quite eager to undertake the 2013/2014
Off-Season Reserves.
Table of Contents of Phosphorus Industry China Monthly Report 1311:
MOFCOM launches the 2014 phosphorus ore export quota application procedure
A brief analysis of different production methods of phosphoric acid
Phosphorus enterprises have mixed feelings on Off-Season Reserves for 2013/2014
Shindoo starts production in two plants and aims to go into phosphorus mining
India postpones sunset review of anti-dumping duties on Chinese phosphoric acid imports
Wengfu-Dazhou and Blue Sword Chemical set up JV to produce fine phosphorus chemicals
Traditional phosphorus exporting countries under pressure from MENA competitors
WUT and Hubei Yihua co-develop advanced phosphogypsum-based cementing materials
Brazil stops probing into China's sodium acid pyrophosphate
International trade of phosphate chemicals in Sept. 2013
Market review of prime phosphate chemicals in Oct. 2013
Price monitoring of some phosphate chemicals in Oct. 2013
th
Phosphorus Industry China Monthly Report, issued by CCM on 15 , keeps providing the
latest company dynamics related to China’s phosphorus industry, and market analysis on
supply and demand, import and export as well as global insight.
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