Fertiliser price squeeze: China halts phosphate exports


Some of China’s major fertiliser companies say they’re temporarily banning the export of phosphate – a major component of commercial fertiliser – until at least June 2022. The reason behind this move is no secret: to ensure the domestic supply of fertilisers and therefore the country’s food production. For a country of 1.4 billion people and counting, guaranteeing fertiliser supply is, therefore, an issue of national security.

Soaring world population stats

As populations increase across the world and supply dwindles further, there may well be similar moves from other governments in due course. To put that increase into stark numbers, according to the United Nations, the world’s population is expected to increase by 2 billion people in the next 30 years from 7.7 billion to 9.7 billion in 2050. Apparently, it could peak at nearly 11 billion in approximately 2100. But, that’s another story altogether.

Trade war?

Back to phosphate supply. China’s latest move will no doubt adversely affect prices. China last cut supply to this extent in 2008, when the country hosted the Olympics. In the words of John Ezinga, Vice President of Agronomy at Michigan Agricultural Commodities: “We’re in a trade war. You’ve got a supply-restricted market today. Ten to twelve years ago, you had a demand-led market with some supply constraints. Logistics is a mess, but I feel pretty comfortable that we’re going to have the supply in the U.S. It’s just — at what price?”

“Not enough to go around”

While the US doesn’t buy much phosphate from China, it does account for approximately 30 per cent of the world’s phosphate trade.  According to Josh Linville, Director of Fertiliser for financial services network StoneX: “The ripple effect is that the entire world trade balance goes down, and there’s just not enough out there to go around.»

Resilience of clean energy supply chains

Beijing’s dominance in critical materials and its strong position in global supply chains is further highlighted by a May report commissioned by the International Energy Agency. This reveals that demand for CRMs is expected to sky-rocket, as more and more  low-carbon technologies are developed by the day. Lithium, for example, is expected to grow as much as 4,000 per cent by 2040 – with China again in control of the market. And, according to the IEA: “Clean energy technologies are set to emerge as a major force in driving demand growth for critical minerals… Alongside the many benefits of clean energy transitions, they also raise additional questions about the security and resilience of clean energy supply chains, which policy makers need to address.”

New strategic partnerships

Interestingly, early in September, the first ever meeting of leaders of the so-called QUAD took place – with an announcement that Australia would intensify co-operation with the United States, India and Japan to ensure that China does not exert excessive control over the supply of minerals essential to modern technology. At a similar time, a new security alliance was announced between the US, UK and Australia – known colloquially as AUKUS. While unrelated to Critical Raw Materials as such, the move shows increasing strategies aiming to combat China’s sphere of influence in certain key areas.

Back to phosphate supply and demand, and until now, China was the world’s top exporter – shipping 3.2 millions tonnes of diammonium phosphate fertiliser in the first half of this year to major buyers such as India and Pakistan, according to customs data. Fertiliser prices in China have hit records this year amid stronger demand from overseas, lower production domestically and high energy costs. While the move is said to be temporary, all eyes are on Beijing’s critical next steps when it comes to critical raw material supply.