China Looks To Export More Urea, DAP

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China’s government has released at new policy regarding fertilizer exports that is designed to allow fertilizer producers export their surplus production, particularly during the offseason.  The new policy, which was released in mid-December, divides the export year into “peak” and “off peak” demand season and dramatically drops export tariff levels from previous years.
China is known to have high fertilizer production capacities, especially for Urea and DAP, or diammonium phosphate.  Unfortunately for U.S. producers, internal policies set by the countries government have kept their surplus production from hitting the world market in the past few years.  That’s expected to change under the new system.  China has reported production capabilities of 71 million metric tons of Urea with a projected increase in capacities to 90 million metric ton by 2017.  Their domestic consumption is currently only 51 million metric tons.  In terms of DAP capacity, production exceeds demand by 14 million metric ton.
Under the changes in tax policy, the peak Urea season will be from November of one year to June of the next.  During peak times, exports of Urea will see an export tax of 15% plus a fee equivalent to US$6.55 per ton.  During the offseason, exports of Urea will only see the fee but no export tax.  This compares to last year’s policy that saw peak season urea exports charged a whopping 77% tariff.  Current Urea prices in China are reported at US$267 per ton compared to the average U.S. retail price of $465 per ton.
For DAP markets, the peak season will be from mid-October of one year to mid-May of the next year.  Export taxes on DAP will also be 15% during peak season but with a slightly higher export fee of $8.20/ton.  As with Urea, off-season exports will see no tariff, just the export fee.  Price differences between Chinese and U.S. DAP markets are not as marked as in Urea, with Chinese DAP priced around $465/ton compared to $493/ton in the U.S.

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