August 29, 2005

China calcium phosphate prices weakened slightly; Limited downside in near-term prices seen

An eFeedLink exclusive report

Ex-factory prices of calcium phosphate in China weakened slightly in most regions in August with no significant pick up in buying and selling activities.

At producing regions, ex-factory offer prices of calcium phosphate from China's Zhengda Shiye company in Guizhou province registered RMB1,850/tonne in recent days. Offer prices for Sichuan province's "Mang" brand were at RMB1,820/tonne.  Meanwhile, offer prices for Yunnan province's "Long" brand, and Sichuan's "Little Prince" registered RMB1,800/tonne. Offer prices for Sichuan's second grade quality brands such as "Mianzhu" and Jiannan" were at RMB1,760/tonne. Offer prices of some other lesser known producers registered between RMB1700-1,750/tonne.

In consumption regions, transacted prices for north-eastern China's first and second grade quality brands of calcium phosphate averaged RMB2,120/tonne and RMB2,080/tonne respectively.  As different brands were available in northern China with purchase prices varying according to quantity, transacted prices there hovered between RMB1,980/tonne and RMB2,080/tonne. Meanwhile, transacted prices in eastern and southern Chinese regions averaged RMB1,980-2,100/tonne while those in the north-west ranged from RMB1,940-2,000/tonne respectively.

Despite improvement in feed consumption in recent days, sales of calcium phosphate has not picked up significantly. Prices have unexpectedly declined for the first time in two months. Analysts attributed this to the following factors:

• Market supply has returned to normalcy in August. Heavy rainfall in June and July had affected the production of Sichuan's phosphate mines and had resulted in supply tightness. However, lesser rainfall in recent weeks had eased supply tightness. Some small and medium calcium phosphate producers have resumed full-scale operation while big producers have also returned to normal operations.
   
• A cyclical oversupply situation has arisen as some big feed millers have procured larges stocks of calcium phosphate in late-June and early-July when prices were higher than current levels. These feed millers' stocks can meet their production requirements until September. Meanwhile, some small and medium-sized feed millers who were optimistic about August feed sales have also stepped in to replenish stocks in late July and early August. Despite improvement in feed sales, most feed millers are still well-stocked with calcium phosphate. This has resulted in a cyclical oversupply situation.
   
• In the earlier period, the tightness in rock phosphate supplies has prompted producers to make upward adjustment to their offer prices and some traders have made procurement on the back of this development. During that period, small calcium phosphate producers have only seen limited sales while medium and big-sized producers were enjoying better sales. However, limited deals were concluded when prices were at their high levels. Those traders who managed to place orders when prices were lower are having their orders fulfilled. These comparatively cheaper stocks have exerted significant influence on market supply-demand conditions. Meanwhile, those traders who failed to secure cheap orders previously have stayed on the sidelines.
   
• The persistent high summer heat in the earlier period has fuelled concerns of disease outbreaks amongst farm animals. However, with the onset of cooler weather, consumption of bone meal has increased. As bone meal is a relatively cheaper substitute, it has produced a great impact on the demand and consumption of calcium phosphate.

Analysts expected near-term demand and consumption of calcium phosphate in China to remain sluggish as feed millers continue to stay on the sidelines. However, with improving feed sales, the downside in calcium phosphate prices is seen limited. 

All rights reserved. No part of the report may be reproduced without permission from eFeedLink.