December 12, 2005

China calcium phosphate prices stable to marginally higher on positive market developments

An eFeedLink exclusive report

Calcium phosphate trade in China significantly picked up lately, while prices have been stable to marginally higher since early-December.

Within 10 days, prices of locally produced calcium phosphate significantly improved. This was due to: 

• During the earlier period, the build up in producers' inventories increased, while that of resellers and users decreased. Since August until recently, China's calcium phosphate market has remained weak. Although producers' sales were poor resulting in significant inventory build up, most traders and feed millers held very limited stocks, making purchases only when the need arose. Consequently, calcium phosphate supplies were concentrated mainly in the hands of producers, with limited stocks released into the market.
  
  After ex-factory prices of calcium phosphate in Sichuan province fell below the level of RMB1,500/tonne in late-November, the need to make inventory replacements gradually increased. Within a short period of time, orders received by producers significantly increased, which lent support to calcium phosphate prices.
  
  
• Most local producers made losses during the earlier period due to weak calcium phosphate prices. Some major local producers including Guizhou Zhengda Industry Co. Ltd. and Hubei Gefeng have cut back on production. Additionally, some medium- and small-sized producers have already suspended production. Local calcium phosphate giant Sichuan Lomon Corporation also suspended part of its production lately for plant maintenance. Consequently, many other producers were more inclined to make upward price adjustments in recent days.
   
• The current downturn in China's livestock industry has improved slightly in recent days. No new bird flu outbreaks were reported in the country lately, while a rise in domestic pork consumption also lent some support to live hog prices.
   
• Many resellers and users placed frequent orders with producers recently, which helped to improve market sentiments. Since end-November, many major traders and feed millers have made bulk purchases from producers. Many medium- and small-sized feed millers also placed spot or urgent orders with traders. Additionally, some major producers had contracts lasting until January 2006 or beyond. In order to facilitate deliveries, they have made upward adjustments to their ex-factory prices.    

Calcium phosphate trade in China including Sichuan is expected to pick up in the near term. With many producers making upward price adjustments, transacted prices of calcium phosphate in China are likely to edge higher in mid-December. However, prices in late-December and beyond would be determined by developments in China's livestock market, such as the impact of bird flu on poultry production. 

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