Quotas and inspection in ports have shrunk supply, especially of phosphates fertilizers
12/06/2022
China reduced shipments of phosphate fertilizers to Brazil by 50% between January and October of this year. Asia’s largest economy put in place a policy of restricting fertilizer exports to protect its domestic market.
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China exported 1.2 million tonnes of this type of input to the Brazilian market in the first 10 months of 2022, while in the same period in 2021 the volume reached 2.5 million tonnes, according to data from the federal government.
China’s share in Brazil’s imports of phosphate fertilizers until October totaled 14%. In the full year 2021, China was Brazil’s leading supplier with 3.3 million tonnes of phosphate fertilizers or 26% of the imports.
The impact reflects the new policy imposed by the Chinese government on its exporters, which came into force in October 2021 and included the sales quotas and increased inspection in ports.
China has increased inspection requirements. As a result, all fertilizer cargoes, except for ammonium sulfate (SAM), are now subject to a quarantine period in ports. This can take up to 70 days.
Since the export restriction policy came into effect in China, the country has lost a large share of the global market, wrote Luigi Bezzon, an analyst at StoneX, in a report.
The shrinkage is evidenced when one looks at the volume exported in the year-to-date. Except for ammonium sulfate, the only nutrient that was excluded from the inspection policy and is not subject to quotas, exports of DAP and MAP phosphate fertilizers fell by 49% and 56%, in that order, in the first 10 months of 2022, compared to the same period in 2021. Urea (nitrogen fertilizer) saw an even stronger drop in the period, of 60%.
There is not much transparency regarding the measure involving quotas, Mr. Bezzon wrote in a report. “It is believed that, in July, export quotas were issued for 3.6 million tonnes of phosphate and compound fertilizers effective for the entire second half of 2022,” he said.
In the first 10 months of 2022, some Chinese companies reached the limit of the volume allowed for export. According to Mr. Bezzon, there were rumors this month that new export quotas would be issued for specific companies, but only for volumes that are already in the ports. The goal is only to clear port stocks, not to encourage new exports.
*By Érica Polo — São Paulo
Source: Valor International