China May Limit Fertilizer Exports to Increase Domestic Supplies, CRU Says

China may cut exports of fertilizers including urea and diammonium phosphate this year to boost local supplies and lower prices after some cooking oils, cotton, sugar and rubber surged to records this week, an analyst said.

“There’s speculation China may release a comprehensive package of policies aimed at restricting crop-nutrient exports to ensure domestic supplies and protect farmers’ interests as soon as December,” Gavin Ju, a consultant at research company CRU, said in an interview in Beijing yesterday.

Reduced shipments from China, among the world’s largest suppliers of urea and phosphate fertilizers, will expand the market for Canada’s Potash Corp. of Saskatchewan Inc., U.S.- based CF Industries Holdings Inc. and Mosaic Co., Australia’s Incitec Pivot Ltd. and their rivals. Urea prices gained 56 percent since May to $340 a ton, according to spot prices tracked by ICIS.

“Any move to restrict Chinese fertilizer exports will inevitably reduce global supply and drive up prices,” Ju said.

Cotton prices in China almost doubled since the beginning of September to a record 33,720 yuan ($5,077) a ton today, while natural rubber futures in Shanghai also nearly doubled in the past year to a record 38,000 yuan a ton today. Sugar, palm oil and rapeseed oil also advanced to all-time highs as reduced domestic production, robust demand and inflation concerns all spurred investments in agricultural products in China.

Rising Exports

China was the world’s largest urea exporter in 2007 and is ranked as one of the largest phosphate fertilizer exporters.

Urea exports jumped to 3.69 million metric tons in the first nine months this year, 83 percent higher than a year earlier, according to CRU estimates. Diammonium phosphate exports also gained, Ju said.

China levies about a 7 percent tariff on urea exports during the non-peak seasons, which run from July 1 to Sept. 15 and from Oct. 16 to Jan. 31, and 110 percent during the rest of the year, the peak season. The government may advance the start of the peak season to Dec. 1 this year, lower the base prices for urea and diammonium phosphate, which would effectively raise the non-peak tariff for urea to 10 percent during non-peak season, Ju said.

The cost of fertilizer output is rising in China, as urea and methanol are produced from coal. Prices of the fuel at Qinhuangdao port, a benchmark for China, rose to the highest in nine months on Nov. 1 on expectations of a colder-than-usual winter.

The price of power-station coal with an energy value of 5,500 kilocalories per kilogram rose 2.7 percent to as much as 775 yuan a metric ton on Nov. 1 from a week earlier, according to data from the China Coal Transport and Distribution Association. That’s the highest since Feb. 8.

(bloomberg.com)